A decrease in the firm's discount rate (r,or WACC) will increase projects' NPVs,which could change the accept/reject decision for any potential project.However,such a change would have no impact on the project's IRR; therefore,the accept/reject decision under the IRR method is independent of the cost of capital.

Question

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A decrease in the discount rate (or WACC) will also decrease the project's IRR, and may change the accept/reject decision under the IRR method. Therefore, the accept/reject decision under the IRR method is not independent of the cost of capital.

A Decrease in the Firm's Discount Rate (R,or WACC) Will