Table 13-3 provides some examples of low risk to high risk projects that business firms may pursue. Explain why each of these projects has a different level of risk associated with it. For example, why is the repair to old machinery considered the lowest risk of all the projects that are listed? Identify why each project after the repair of machinery is considered riskier than the previous project listed.

13-3 Risk categories and associated discount rates Low or no risk (repair to old machinery). Moderate risk (new equipment) Normal risk (addition to normal product line) Risky (new product in related market. High risk (completely new market)... Highest risk (new product in foreign mareket. Discount Rate 6% 8 10 12 16 20