HydroGrow is considering building a new building in which to grow tomatoes.The board meets and decides that this is the right thing to do.Before they can put their plans into action,the interest rate increases.The present value of the returns from this investment project
A)falls, and so Hydro Grow is less likely to build the building.
B)falls, and so HydroGrow is more likely to build the building.
C)rise, and so HydroGrow is less likely to build the building.
D)rise, and so HydroGrow is more likely to build the building.

Question

Quizplus · Accepted Answer

An increase in the interest rate will increase the discount rate used to calculate the present value of the returns from the investment project. This will result in a lower present value of the returns, making the project less attractive and reducing the likelihood that HydroGrow will go forward with it.

HydroGrow Is Considering Building a New Building in Which to Grow