What will result from an increase in the risk-adjusted discount rate for a risky project?
A)no change in the NPV
B)an increase in the IRR
C)an increase in the NPV
D)a decrease in the NPV

Question

Quizplus · Accepted Answer

An increase in the risk-adjusted discount rate will result in a higher cost of capital, which will decrease the present value of future cash flows associated with the project, leading to a decrease in the NPV. The IRR may increase if the project's cash flows are skewed towards later periods, but this is not guaranteed. Therefore, option D is the best choice.

What Will Result from an Increase in the Risk-Adjusted Discount