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a) Assume the market suddenly becomes less risk averse (think coronavirus vaccination rates, the
Presidential race and drama are behind us, businesses are opening back up, etc.). What would be the
effect on required rates of return and why? In turn, what would be the effect on NPV for the above
projects? Explain.
b) How would a change in the required rate of return affect the projects internal rate of return (IRR)?
Explain. Would the accept/reject decision change using the IRR analysis method? Explain.
c) Think about changes that happen in a project once it has been accepted and moving forward. Here are
3 potential scenarios. For each, describe what you expect to happen to the project's expected NPV, and
WHY that is your expectation.
i. Your workforce voted in a new union, raising wages for most line-workers. There has been no
change in your product pricing or other expenses/revenue projections.
ii. Once construction began on the project, a rare black-footed ferret was found nearby.
Environmental groups have demanded that the project halt operations for 9 months while the
ferrets are found and relocated. Once the ferrets were moved, operations continued as originally
planned, but with all cash flows shifted out by 9 months.
iii. Due to a (lucky) miscalculation by the marketing folks, demand for your projects products has
increased in the early years of the project, but that "stole" sales from future years. The same
total inflows were achieved, but the timing was more front-loaded than anticipated
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