ABC Limited came up with the following estimation on the risk of the expected cash flow for Project A.
Year Expected cash flow for Project A Certainty equivalent coefficient
0 -$2000000 1.00
1 $200000 0.94
2 $400000 0.89
3 $600000 0.84
4 $800000 0.80
5 $1000000 0.76
6 $650000 0.70
If the required rate of return for Project A is 13.27%, including a 6.27 risk premium, is this project worth investing in?