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Answer (D) is correct . MACRS is an accelerated method of depreciation under which depreciation expense will be greater during the early years of an asset’s life. Thus, the outflows for income taxes will be less in the early years, but greater in the later years, and the NPV (present value of net cash inflows – investment) will be increased. The profitability index (present value of net cash inflows ÷ the investment) must increase if the NPV increases.

Answer (A) is incorrect because The NPV will increase. The present value of the net inflows will increase with no change in the investment.
Answer (B) is incorrect because The IRR will increase. Deferring expenses to later years increases the discount rate needed to reduce the NPV to $0.
Answer (C) is incorrect because The payback period will be shortened. Switching to MACRS defers expenses and increases cash flows early in the project’s life.