Other Things Held Constant,which of the Following Would Increase the NPV

question 6

Multiple Choice

Other things held constant,which of the following would increase the NPV of a project being considered?

• A) A shift from straight-line to MACRS depreciation.
• B) Making the initial investment in the first year rather than spreading it over the first three years.
• C) An increase in the discount rate associated with the project.
• D) An increase in required net operating working capital.
• E) The project would decrease sales of another product line.

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Definitions:

Stock Split

The division of a company's existing stock into multiple shares to boost the liquidity of the shares, although the market capitalization remains the same.

SFAS No.123

An accounting standard issued by the Financial Accounting Standards Board (FASB) related to the expensing of stock options, specifying how companies should account for stock-based compensation.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific time frame.

APB No.25

An accounting principle that dealt with stock-based compensation and required companies to record an expense for issued options.