Changes in the discount rate used to complete net present value analysis can have a significant impact on the estimated value of the investment and therefore affect the overall investment decision. As the required internal rate of return (IRR) increases, the net present value will:
A) decline
B) increase
C) remain the same
D) become zero

Question

Quizplus · Accepted Answer

As the required internal rate of return (IRR) increases, the discount rate used in net present value analysis will also increase. This will result in a smaller present value of future cash flows for the investment, leading to a lower net present value. Therefore, the net present value will decline as the required IRR increases.

Changes in the Discount Rate Used to Complete Net Present