Theresa is analyzing a project that currently has a projected NPV of zero. Which one of the following changes that she is considering is most apt to cause that project to produce a positive NPV instead? Consider each change independently.
A) Decrease the sales price
B) Increase the materials cost per unit
C) Decrease the labor hours per unit produced
D) Decrease the sales quantity
E) Increase the amount of the initial investment in net working capital

Question

Quizplus · Accepted Answer

Decreasing the labor hours per unit produced will reduce the cost of production, thereby increasing the overall profit margin and increasing the NPV. All other options would have negative impacts on the project's profitability and lead to a lower NPV.

Theresa Is Analyzing a Project That Currently Has a Projected