A company is considering a project that requires an initial investment of $95,000 and is expected to yield a return of $112,000 in one year. The current risk-free rate of return is 4%. Due to the project's uncertainty, an additional risk premium of 8% is considered appropriate. Based on this information, which of the following statements provides the correct analysis and decision?

Implied Risk Premium Analysis

Investment Decision for a New Tech Venture

An increase in the risk premium associated with an investment project will, all else being equal, result in a higher calculated Net Present Value for that project.

An investment firm is evaluating four different projects. For each project, calculate its Net Present Value (NPV) and determine the correct investment decision. Then, match each project with its corresponding outcome.

A project has an expected return of $150,000 in one year. The risk-free rate is 3%, and the project carries a risk premium of 7%. To make this project financially viable (i.e., have a non-negative Net Present Value), the maximum initial investment that should be made is $______. (Round your answer to the nearest whole dollar, and do not include commas or currency symbols).

Critique of an Investment Decision

You are an analyst tasked with evaluating a potential investment project that has an uncertain future payoff. Arrange the following steps in the correct logical order to determine whether the project should be undertaken.

Project Evaluation Review

A junior analyst is evaluating a project that requires a $195,000 initial investment and is expected to generate a return of $230,000 in one year. The current risk-free rate is 5%, and a 10% risk premium is deemed appropriate for this project's level of uncertainty. The analyst calculates the project's value by discounting the expected return only by the risk-free rate, concludes the project is profitable, and recommends proceeding. Which of the following statements provides the most accurate critique of the analyst's work?