After estimating a project’s NPV, the analyst is advised that the fixed capital outlay will be revised upward by $100,000. The fixed capital outlay is depreciated straight-line over an eight-year life. The tax rate is 40% and the required rate of return is 10%. No changes in cash operating revenues, cash operating expenses, or salvage value are expected. What is the effect on the project NPV?
A. $100,000 decrease.
B. $73,325 decrease.
C. $59,988 decrease
Answer: B. $73,325 decrease.
Business
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