A company faces a 10% capital cost, and the manager is evaluating a potential investment projects with a required initial investment of $200,000. This 3-year project is projected to yield positive cash flows of $100,000 in year 2, and $160,000 in year 3 (there is no cash flow in year 1).

If the management considers that this project is riskier than initially thought, how will this affect the value of the project?

a.The required rate of return will be higher than 10%

b.The required rate of return will be lower than 10%

c.The required rate of return will be lower than 10%and the NPV will be lower

d.The required rate of return will be higher than 10% and the NPV will be higher