Question

If the project’s cost of capital were to increase, how would that affect the IRR?

a. The IRR would decrease

b.The IRR would not change

c. The IRR would increase

Answer 1

b.The IRR would not change

Step-by-step explanation:

The IRR is the discount rate that equates the after tax cash flows from an investment to the amount invested.

The IRR isn't affected by changes in the cost of capital because it isn't used in the calculation of the IRR.

An investment is accepted if the IRR is greater than the cost of capital .

Changes in the cost of capital would affect the NPV because it is used in the calculation of NPV.

I hope my answer helps you