A decrease in the cost of capital will cause the ____ to decrease.

Question

Quizplus · Accepted Answer

A decrease in the cost of capital does not directly cause the Net Present Value (NPV), Internal Rate of Return (IRR), or payback period to decrease. Instead, a lower cost of capital typically increases the NPV of a project because future cash flows are discounted at a lower rate, making them more valuable in present terms. It does not directly affect the IRR, as the IRR is the rate at which the NPV equals zero, independent of the cost of capital. The payback period is concerned with the time it takes for the cash inflows to cover the initial investment, which is not directly influenced by changes in the cost of capital.

A Decrease in the Cost of Capital Will Cause the ____