Which of the Following Events Might Negatively Affect a Project's

question 12

Multiple Choice

Which of the following events might negatively affect a project's net present value?

• A) Rules change to allow for faster depreciation of plant and equipment.
• B) Tax rates go down, which lowers the value of the tax shelter from depreciation.
• C) Projected sales over the life of the project remain the same, but they are higher in the early years and lower in the later years.
• D) Interest rates go up requiring an increase in the required rate of return.

---

Definitions:

Salvage Value

The estimated residual value of an asset after it has reached the end of its useful life.

Overhaul Costs

Overhaul costs are the expenses associated with major maintenance or the complete refurbishing of equipment, machinery, or a facility to extend its life and efficiency.

Screening Decisions

The process of evaluating various projects or investments to determine their feasibility and alignment with organizational goals before deeper analysis.

Capital Budgeting

The process in which a business evaluates and plans for significant investments or expenditures.