d$)$ 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 a project's expected NPV$,$ and WHY that is your expectation. $(2$ pts for each of the following$).$ Recall the $3$ important factors for value: riskiness of cash flows $($think required rate of return$),$ timing of cash flows, amount of cash flows.

As MBA students, just being able to calculate NPV isn$$t sufficient. You should be able to consider the effects of various market or project changes on the project$$s viability.

LOOK AT EACH SITUATION INDIVIDUALLY AND ASSUME THAT THERE ARE NO OTHER CHANGES FOR THE FIRM.

i$.$ Your firm has a project with lower risk than your firm$$s $$regular$$ project. The project has been tentatively accepted for development, assuming a required rate of return of $13\%.$ That required rate of return was estimated one year ago, before the FED began its interest rate hikes. The risk free rate has increased by $2\mathrm{.}5\%$ from that used in the original projection.

ii$.$ Due to a $($very unlucky$)$ miscalculation by the marketing folks, demand for your project's products has decreased in the early years of the project, but that "added" sales from future years. The same total inflows were achieved, but the timing was more back$-$loaded than anticipated.

iii. Prior to project startup, a rare black$-$footed ferret was found nearby. The assumption was that the project would be put on hold for a year while the little critters were relocated. Because of this, the financial guys planned on no revenues the first year, with positive cash flows starting in year $2.$ Right after construction ended on schedule, it was determined that there was a single ferret $($Remember the one found prior to startup that caused all the fuss?$)$ This little guy turned out to be someone's pet and there is now no need to delay operations, AND REVENUES will start up immediately, a full year earlier than in the projections.