Fall 2012 – homework – finc 5340
The new assumption affects the analysis by changing the expected return on the investment. For example, if the initial assumed rate of return was 8%, but now it is 6%, then this would require a reassessment of whether or not making the investment is still a viable option. Depending on other factors such as risk tolerance and available capital, one may still recommend making the investment under these circumstances, but with less enthusiasm than before.
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