B is corrent. The requirement is to identify the event that would decrease the internal rate of return of a proposed asset purchase. An event that would decrease the internal rate of return would have to either decrease or extend the cash flows from, or increase the initial cost of, the investment. Answer A is correct because a decrease in tax credits would increase the initial cost of the investment.
A is incorrect because a decrease in related working capital requirements would increase the cash flow from the investment.
C is incorrect because shortening the payback period would increase the rate of return of the investment.
D is incorrect because using accelerated depreciation would result in less tax expense in the earlier years and, therefore, increase the rate of return.
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