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).

As MBA students, just being able to calculate NPV isnt sufficient. You should be able to consider what the effects of various market or project changes on the projects viability.

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

Two years ago, when the original cash flow projections were prepared for one of your companys projects it was assumed that the needed equipment upgrades in year 2 would cost $2mm and with inflation and technology problems, this cost has been revised to $2.8mm.

This project was expected to require 24 months of development work, with cash flows forecast for years 3 through 15 of the projects life. Due to better than expected labor and supply issues, it will now take only 12 months for the development work and the same annual cash flows are now forecast for years 2 through 14.

Your firm has a project expected to begin work in mid-2023. When the original financial projections and analysis were done in mid-2021, the firm was expected a required return of 13%. Due to inflation and the associated increase interest rates, the firms new required rate of return for this project is 15%.