All else constant,the net present value of a typical investment project increases when:
A) the discount rate increases.
B) each cash inflow is delayed by one year.
C) the initial cost of a project increases.
D) the rate of return decreases.
E) all cash inflows occur during the last year of a project's life instead of periodically throughout the life of the project.

Question

Quizplus · Accepted Answer

The net present value (NPV) of an investment project increases when the rate of return decreases because a lower discount rate increases the present value of future cash inflows, thereby increasing the NPV.

All Else Constant,the Net Present Value of a Typical Investment