Which of the following will increase the net present value of a project?
A) An increase in the initial investment
B) A decrease in annual cash inflows
C) An increase in the discount rate
D) A decrease in the discount rate

Question

Quizplus · Accepted Answer

The net present value of a project is calculated by discounting the expected cash inflows and outflows to their present values and subtracting them from each other. The discount rate is the rate used in this process, and a lower discount rate will result in a higher present value of future cash flows. Therefore, a decrease in the discount rate will increase the net present value of a project. Conversely, an increase in the initial investment or a decrease in annual cash inflows will decrease the net present value of a project.

Which of the Following Will Increase the Net Present Value