Which of the statements below is true? a. The graphic plot of project NPV agains

Question

Which of the statements below is true?

a. The graphic plot of project NPV against discount rate is called the NPV profile

b. NPV profile is always downward sloping, i.e., NPV decreases with higher discount rate

c. At the intercept point of the NPV profile with the horizontal axis, the project IRR is zero.

d. All of the above

e. None of the above

a. The graphic plot of project NPV against discount rate is called the NPV profile

b. NPV profile is always downward sloping, i.e., NPV decreases with higher discount rate

c. At the intercept point of the NPV profile with the horizontal axis, the project IRR is zero.

d. All of the above

e. None of the above

Explanation / Answer

d) All of the Above

As,
NPV profile - graphical illustration of a projects NPV at different discount rates and with higher discount rates cash flows are discounted more which lead to lower NPV generally. therefore NPV profiles are downward sloping.

Also, In NPV profile graphical plot discount rate are used at Horizontal axis (x axis) and the corresponding NPV on vertical axis (y axis) thus where NPV is 0, NPV profile will intersect X axis and that discount rate is IRR

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