Which of the following will decrease the net present value o

Which of the following will decrease the net present value of a project? a. Increasing the value of each of the project’s discounted cash flows b. Moving each of the cash outflows one period farther into the future c. Decreasing the discount rate d. Increasing the project’s initial cost at time zero e. Increasing the amount of the final cash inflow

Solution

Correct option is > d. Increasing the project’s initial cost at time zero

Rest all options will increase the NPV of the project:

a. Increasing the value of each of the project’s discounted cash flows > It will increase the cash flow values and hence NPV will increase

b. Moving each of the cash outflows one period farther into the future > Cash outflows going one period far will have higher weight of discount rate hence it will increase NPV

c. Decreasing the discount rate > Discount rate is lower than NPV is higher

e. Increasing the amount of the final cash inflow > Increase in inflow will increase NPV