ECONOMICS

Detailed explanation-1: -After all, the NPV calculation already takes into account factors such as the investor’s cost of capital, opportunity cost, and risk tolerance through the discount rate. And the future cash flows of the project, together with the time value of money, are also captured.

Detailed explanation-2: -Taxes affect a net present calculation in two ways: first, they affect periodic operating cash flows; second, they affect the final salvage value of the project because any gain or loss on sale carries tax implications.

Detailed explanation-3: -Net Present Value (NPV) is defined as the present value of the future net cash flows from an investment project. NPV is one of the main ways to evaluate an investment.

Detailed explanation-4: -The answer is d. increasing the project’s initial cost at time zero. The net present value is calculated by subtracting the initial cost of an investment from the discounted value of its cash flows. Therefore, if we increase the initial expense, the net present value will be reduced.