The net present value of a project will increase as the required rate of return is decreased (assume only one sign reversal).

Question

Quizplus · Accepted Answer

The net present value of a project is calculated by discounting the expected cash inflows and outflows of the project at a required rate of return. As the required rate of return is decreased, the discount rate used in the calculation decreases, leading to a higher net present value. Therefore, the statement is true. However, if the required rate of return is decreased too much, the project may become unprofitable, and the net present value may eventually decrease.

The Net Present Value of a Project Will Increase as the Required