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Question
KLE Holdings is considering a capital budgeting project with a life of 7 years that requires an initial outlay of $277,400. The probability distribution for annual incremental cash flows is as follows:| Probability | Incremental Free Cash Flow |
| 4% | -$15,000 |
| 16% | 18,000 |
| 55% | 65,000 |
| 25% | 99,000 |
a. The risk-adjusted required rate of return for this project is 12%. Calculate the risk-adjusted net present value of the project and the project's IRR.
b. Should the project be accepted?
Answer
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