Other things held constant, which of the following would increase the NPV of a project being considered?
A) A shift from MACRS to straight-line depreciation.
B) Making the initial investment in the first year rather than spreading it over the first 3 years.
C) A decrease in the discount rate associated with the project.
D) The sale of the old machine in a replacement decision at a capital loss rather than at book value.
E) An increase in required working capital.

Question

Quizplus · Accepted Answer

A decrease in the discount rate would decrease the present value of future cash flows, and therefore increase the net present value (NPV) of the project. The other choices would either have no impact on the NPV or decrease the NPV (A, B, D, and E).

Other Things Held Constant, Which of the Following Would Increase