An increase in the firm's WACC will decrease projects' NPVs,which could change the accept/reject decision for any potential project.However,such a change would have no impact on projects' IRRs.Therefore,the accept/reject decision under the IRR method is independent of the cost of capital.

Question

Quizplus · Accepted Answer

An increase in WACC could potentially affect the IRR of a project, as it is calculated based on the discount rate used in the NPV calculation. Therefore, the accept/reject decision under the IRR method is not always independent of the cost of capital.

An Increase in the Firm's WACC Will Decrease Projects' NPVs,which