Question

Which one of the following will increase the net present value of a project?

-decreasing the WACC

-increasing the amount of the initial cash outflow

-decreasing the amount of each cash inflow

-having all incoming cash flows occur in the final year of a project rather than periodically over a five-year period

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS OPTION A : decreasing the WACC

• Decreasing the WACC will increase the Present Value of Cash Inflow and hence increase the NPV.
• Increasing the amount of initial cash outflow will decrease the NPV
• Decresing the amount of cash outflow will decrease the Present Value of Cash Inflows and hence decrease the NPV.
• It will eliminate the possibility of early recoery and hence decrease the PV od cash inflows and hence decrease NPV.

I hope this solves your doubt.

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