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3. The Misers Choice You are making a choice on behalf of an investor who has $100 to spend. They ask you to choose one of the three potential investment projects: A, B, or C. Each project requires an upfront investment (CF0) and delivers a payoff in one year (CF1) with 100% certainty. The cash flows for each project are listed below: Project A Project B Project C CFo -100 -50 -40 CF 119 42 (a) (3 points) Given a risk-free rate of k-12%, calculate the NPV for all three projects. Which project should you choose? (b) (7 points) Now suppose that the investor does not care about receiving any money today. All they care about is how much income they receive tomorrow. Does your answer from part a) change? Explain why or why not by showing how the investor can achieve their preferred cash flow stream under each project choice, assuming that they can obtain a risk-free return of 12% by investing in financial markets.please step by step, thank you very much

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0 Cash Flows Discounting factor @ 12% Discounted cash flows 100 1.000 100 119 0.893 106 NPV 6 10 0 50 1.000 50 12 13 14 15 16 17 18 19 20 21 Cash Flows Discounting factor @ 12% Discounted cash flows 0.893 69 NPV 19 0 Cash Flows Discounting factor @ 12% Discounted cash flows 42 0.893 38 1.000 23 24 25 26 27 28 NPV Since Project B has maximum NPV, Project B should be selected4 Cash Flows Discounting factor @ 12% Discounted cash flows 119 -C5/(1+12%) -D4 D5 -100 NPV SUM(C6:D6) 10 12 13 Cash Flows Discounting factor @ 12% Discounted cash flows -c13/(1+12%) -D12 D13 -C12*C13 15 16 NPV SUM(C14:D14) 18 0 20 21 Cash Flows Discounting factor @ 12% Discounted cash flows 40 42 -c21/(1+12%) -C20* C21 -D20 D21 23 24 25 26 27 NPV SUM(C22:D22) Since Project B has maximum NPV, Project B should be selected119 0 SUM(D4:D5) 4 Cash Flows at Year 0 Opportunity cost @ 12% Cash Flows at Year 1 -100 -c4*12% -SUM(C4:C5) Profit at Year 1 SUM(C6:D6) 10 12 13 Cash Flows at Year 0 Opportunity cost @ 12% Cash Flows at Year 1 50 -c12 12% -SUM(C12:C13) -SUM(D12:D13) 15 16 17 18 19 20 21 Profit at Year 1 SUM(C14:D14) Cash Flows at Year 0 Opportunity cost @ 12% Cash Flows at Year 1 0 -40 -c20 12% =SUM(C20:C21) 42 0 SUM(D20:D21) 23 24 25 26 27 28 Profit at Year 1 SUM(C22:D22) Since Project B has maximum Profit at Year 1, Project B should be selected0 -100 -12 112 119 Cash Flows at Year 0 Opportunity cost @ 12% Cash Flows at Year 1 119 Profit at Year 1 10 Cash Flows at Yea

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