Two mutually exclusive proposals (Project D and Project J) will be analyzed using a 12.5% discount rate. Marginal tax rate of the company is 40%. The company revises Project J with annual operating costs being 15% higher than originally forecasted and with annual sales revenues being 5% lower than originally forecasted. Holding all else constant, how will the projects NPV ($ thousand) be impacted? Selected data for Project J (investment horizon is 3 years) is below (amounts in $ thousands).

Selected data:

Initial fixed capital outlay = 25,000; Annual operating costs (cash) = 40,000; Annual sales revenues (cash) = 65,000;

Increase in net working capital (half of this will be recovered at the end of the project) = 15,000; Annual depreciation = 2,000;

Salvage value (book) at end of investment horizon = 19,000;

Salvage value (market) at end of investment horizon = 26,000;

Question 6 options:

	The NPV will decrease by 13,216
	The NPV will increase by 3,929
	The NPV will decrease by 3,929
	The NPV will increase by 13,216