Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.

María Hernández is a sell-side analyst covering the electronics industry in Spain. One of the companies she follows, SG Electronics, S.A., has recently announced plans to begin producing and selling a new series of video cameras. Hernández estimates that this project will increase the value of the company and, consequently, she plans on changing her research opinion on the company from a “hold” to a “buy.” Her initial financial predictions for the project are:● Fixed capital equipment outlay is €2,750,000.● At the beginning of the project, a required increase in current assets of €200,000 and a required increase in current liabilities of €125,000.● Straight-line depreciation to zero over a five-year life.● Project life of five years.● Incremental annual unit sales of 3,000 at a unit price of €600.● Annual fixed cash expenses of €125,000; variable cash expenses of €125 per unit.● The capital equipment is expected to be sold for €450,000 at the end of Year 5. At the end of the project, the net working capital investment will be recovered.● Tax rate of 40 percent.● Based on the capital asset pricing model, the required rate of return is 12 percent.Hernández estimates the expected net present value (NPV) of the project to be €975,538 and the internal rate of return (IRR) to be 24.6 percent. She also performs a sensitivity analysis by changing the input variable assumptions used in her initial analysis.When reviewing Hernández's work, her supervisor, Arturo Costa, notes that she did not include changes in the depreciation method, initial fixed capital outlay, or inflation assumptions in her sensitivity analysis. As a result, Costa asks the following questions:Question 1“What would be the effect on the project's NPV if the initial fixed capital equipment outlay increased from €2,750,000 to €3,000,000, everything else held constant?”Question 2“How would a higher than expected inflation rate affect the value of the real tax savings from depreciation and the value of the real after-tax interest expense, everything else held constant?”Question 3“You are using a required rate of return of 12 percent when the company's weighted average cost of capital (WACC) is 10 percent. Why are you using a required rate of return for the project greater than the company's WACC?”Before ending the meeting, Costa tells Hernández: “Last year the company produced a prototype at a cost of €500,000. Now management is having doubts about the market appeal of the product in its current design, and so they are considering delaying the start of the project for a year, until the prototype can be shown to industry experts.”
Hernández's best response to Costa's second question is that:
Option A:real tax savings from depreciation and real interest expense would be lower.
Option B:real tax savings from depreciation would be higher and real interest expense would be lower.
Option C:real tax savings from depreciation would be lower and real interest expense would be higher.

Answer: A