Suppose you have firm with perpetual cashflows of $10,000,000 a year. Consider five hypothetical risk levels and five hypothetical expected returns by investors according to the following table:

Risk level	1	2	3	4	5
Expected return	0.06	0.08	0.1	0.12	0.15

Prepare to discuss the following in the live session:

• Why do investors expect higher returns for riskier cash flows?
• Provide the value of the firm under each of the hypothetical risk level.
• How does firm value change with expected return of the cashflows?
• How does firm value change with riskiness of cash flows?
• Will the expected return change if investors can invest in other firms?
• How?