Project cash flows are defined by: Length of project, Initial and subsequent investments required, and Why not use firm”s cost of equity or capital to evaluate all projects? Projects and an under-investment in safe projects. Ex., Ford has a cost of capital of 10% and is considering entering the software development industry. The rate of return it expects to earn on projects it undertakes is 13%. Should these projects be accepted? Equity risk for projects Actual project cash flows are different from what was expected. How can risk be reduced /eliminated, i.e., diversified away?