The profitability of an investment project will increase if

Question

Quizplus · Accepted Answer

When real interest rates decrease, the cost of borrowing decreases, making it cheaper for companies to finance their investment projects. This ultimately leads to higher profitability as the cost of capital decreases. Therefore, a decrease in real interest rates is beneficial for investment projects. A, B, and D are incorrect choices as they all lead to an increase in costs, either through higher tax rates or higher interest rates, which would decrease profitability.

The Profitability of an Investment Project Will Increase If