When the costs of an investment come before that investment's benefits, what will be the effect of a rise in interest rates on the attractiveness of that investment to potential investors?
A)It will make it more attractive, since it will decrease the investment's net present value (NPV).
B)It will make it less attractive, since it will increase the investment's net present value (NPV).
C)It will make it less attractive, since it will decrease the investment's net present value (NPV).
D)It will make it more attractive, since it will increase the investment's net present value (NPV).

Question

Quizplus · Accepted Answer

When costs come before benefits, the investment has a negative net present value (NPV). An increase in interest rates will decrease the NPV further, making the investment less attractive to potential investors.

When the Costs of an Investment Come Before That Investment's