As the minimum required rate of return increases for an investment project,the net present value of the project ________.
A) increases
B) does not change
C) decreases
D) becomes positive

Question

Quizplus · Accepted Answer

As the minimum required rate of return increases, the net present value of the project decreases. This is because the higher the required rate of return, the more discount is applied to the future cash flows, making them worth less today. As a result, the project may no longer be profitable at the higher required rate of return, and its net present value will decrease or turn negative.

As the Minimum Required Rate of Return Increases for an Investment