Which of the following changes, if of a sufficient magnitude, could turn a negative NPV project into a positive NPV project?
A)a decrease in the estimated annual sales.
B)an increase in the discount rate.
C)an increase in the initial investment.
D)a decrease in the fixed costs.

Question

Quizplus · Accepted Answer

A decrease in fixed costs would lower the total costs of the project, which would increase operating income and cash flows, potentially turning a negative NPV project into a positive one. Decreases in estimated annual sales, increases in the discount rate, and increases in initial investment would all decrease the present value of cash flows, making it even more negative.

Which of the Following Changes, If of a Sufficient Magnitude