San Gabriel Corp. recently considered buying an Italian company and making it a foreign subsidiary of San Gabriel. Using a 17% required rate of return, San Gabriel concluded that the decision was a close call, but its evaluation of the purchase of the Italian company just barely failed the NPV test. In the last week, San Gabriels required return on that subsidiary increased to 21 percent. If the purchase price for the Italian company has not changed, is the project now more likely or less likely to pass the NPV test? A. More likely to pass the NPV test.

B. Less likely to pass the NPV test.

C. The answer depends on how the cash flows are affected.