What Happens to the NPV of a One-Year Project If

question 129

Multiple Choice

What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600, the firm is not profitable, has a 15% tax rate and employs a 12% cost of capital?

• A)NPV decreases by $200.00
• B)NPV decreases by $178.57
• C)NPV decreases by $130.00
• D)NPV decreases by $113.04

---

Definitions:

Income Statements

A financial statement that records a company's revenues and expenses over a specific period, showing net profit or loss.

Contribution Format

A structure of the income statement that distinguishes between fixed and variable expenses to emphasize the contribution margin.

Merchandising Company

A type of business that derives its revenue from retailing or wholesaling products it does not manufacture.

Traditional Format

A standard or conventional method of presenting financial information, such as income statements or balance sheets, that follows established accounting principles.