question archive Which one of the following statements about costs is correct? Total costs will decrease as the variable cost per unit increases, all else held constant
Which one of the following statements about costs is correct? Total costs will decrease as the variable cost per unit increases, all else held constant
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Which one of the following statements about costs is correct?
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Total costs will decrease as the variable cost per unit increases, all else held constant.
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The higher the total costs, the larger the net present value of a project.
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A decrease in total fixed costs will increase the net present value of a project, all else held constant.
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Total costs will be greater under the best-case scenario than under the base-case scenario.
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An increase in the variable cost per unit will increase the contribution margin, all else held constant.
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While calculating the net present value, the formula used is-
NPV = - initial investment + cash inflow/(1+i)^n
Here, if the fixed cost reduces, the NPV is bound to increase as the initial investment falls. Hence, the correct option is-
A decrease in total fixed costs will increase the net present value of a project, all else held constant.
