The net present value of a project will increase when the:
A) Discount rate increases.
B) Initial investment increases in amount.
C) Cash inflows are received sooner.
D) Estimated salvage value of the equipment is lowered.
E) Tax rate applied to the project's profits is increased.

Question

Quizplus · Accepted Answer

The net present value (NPV) of a project increases when the cash inflows are received sooner because receiving cash earlier improves the present value of those inflows when discounted back at the project's required rate of return.

The Net Present Value of a Project Will Increase When