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

question 107

Multiple Choice

What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600,the firm is profitable,has a 35% tax rate,and employs a 12% cost of capital?

• A) NPV decreases by $200.00.
• B) NPV decreases by $173.91.
• C) NPV decreases by $130.00.
• D) NPV decreases by $113.04.

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Definitions:

Annual Dividend

Annual dividend refers to the total dividend payment a shareholder receives per share of stock owned in a company over the course of a year.

Rate of Return

The outcome, whether gainful or not, of an investment throughout an established period, expressed as a percentage of the investment's purchase cost.

Annual Dividend

A financial distribution made by a corporation to its shareholders, usually once or multiple times a year, from its earnings.

Increase by

To grow or expand in value or size by a certain amount or percentage.