Assume a project has normal cash flows (i.e., the initial cash flow is negative,

Question

Assume a project has normal cash flows (i.e., the initial cash flow is negative, and all other cash flows are positive). Which of the following statements is most correct?

Question 15 options:

All else equal, a project's IRR increases as the cost of capital declines.

All else equal, a project's NPV increases as the cost of capital declines.

All else equal, a project's MIRR is unaffected by changes in the cost of capital.

All else equal, the Payback will be lower, the higher the cost of capital.

All else equal, a project's IRR increases as the cost of capital declines.

All else equal, a project's NPV increases as the cost of capital declines.

All else equal, a project's MIRR is unaffected by changes in the cost of capital.

All else equal, the Payback will be lower, the higher the cost of capital.

Explanation / Answer

The correct answer is

All else equal, a project's NPV increases as the cost of capital declines

As there is decrease in cost of capital there will be increase in the Net Positive Value and viice versa

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