Which of the following events might negatively affect a project's net present value?
A) Rules change to allow for faster depreciation of plant and equipment.
B) Tax rates go down, which lowers the value of the tax shelter from depreciation.
C) Projected sales over the life of the project remain the same, but they are higher in the early years and lower in the later years.
D) Interest rates go up requiring an increase in the required rate of return.

Question

Quizplus · Accepted Answer

A higher interest rate would increase the discount rate used in NPV calculations, resulting in a lower value for the project's net present value. The other options would have a positive effect on net present value.

Which of the Following Events Might Negatively Affect a Project's