All other factors held constant,the longer the firm must take to depreciate the initial cost of an investment project,the higher will be the project's NPV.

Question

Quizplus · Accepted Answer

This statement is false. The longer it takes to depreciate the initial cost of an investment project, the lower the project's NPV will be. Depreciation expense reduces taxable income, which decreases the firm's cash flows and therefore reduces the project's NPV.

All Other Factors Held Constant,the Longer the Firm Must Take