In general, an increase in salvage value ________ and an increase in the interest rate ________ the present worth of a project.
A)increases, increases
B)increases, decreases
C)decreases, increases
D)decreases, decreases
E)does not change, decreases

Question

Quizplus · Accepted Answer

An increase in salvage value increases the present worth because it represents a higher end-of-life value being brought back to present value terms. An increase in the interest rate decreases the present worth because future cash flows are discounted more heavily, reducing their present value.

In General, an Increase in Salvage Value ________ and an Increase