All else constant, the net present value of a project increases when:
A) The discount rate increases.
B) Each cash inﬂow is delayed by one year.
C) The initial cost of a project increases.
D) The rate of return decreases.
E) All cash inﬂows occur during the last year of a project's life instead of periodically throughout the life of the project.

Question

Quizplus · Accepted Answer

The net present value (NPV) increases when the rate of return (discount rate) decreases, as future cash flows are discounted less, making them more valuable in present terms.

All Else Constant, the Net Present Value of a Project