Assume that an investment project’s assumed cash flows are not changed, but the assumed weighted-average cost of capital is reduced. What impact would this have on the net present value (NPV) and the internal rate of return (IRR) of this project? Calculator Time Value Tables Opens in new windowSelect only one option.A.NPV would increase, and IRR would increase.B.NPV would increase, and IRR would not change.Answer B is Correct.If the cost of capital is reduced, the PV factors are increased. This would result in a higher discounted cash inflow each year, resulting in a higher NPV. However, because the project’s assumed cash flows are not changed, the IRR will not change. The IRR is the rate that makes the present value of the expected cash inflows equal the present value of the expected cash outflows.C.NPV would not change, and IRR would not change.D.NPV would decrease, and IRR would increase.  Only Display Missed/Flagged Questions Back Next End ReviewHow Can We Help? Opens in new window

Capital budgeting projects that have Internal Rates of Return (IRR) which are lower than the firms cost of capital (WACC) will:Group of answer choicesNegative NPV'sHave positive NPV'sWill be accepted by the firmHave only negative cashflow

Suppose an investment has an initial capital cost of $500, an ongoing cost of $19.50 per year and an annual benefit of $160. If the project lasts for 5 years and the discount rate is 5%, the NPV is _______, the internal rate of return is  ________ . If financing is required for this project and the financing rate is 15%, then the project should be ________.$108; 12.5%; rejected$103; 12.5%; rejected$108; 12.5%; accepted$103; 12.5%; accepted

Continue considering Firm UVW. Suppose Firm UVW is considering investing in a new projectof urban development. The cost of the project is $5 Millions of USD. Firm UVW expects thatthe non-incremental yearly cash flows from the project are $1.5 Million of USD for the nextfive years; e.g. that is $1.5 Million of USD each year. Using the calculated WACC in theprevious question, what is the Net Present Value (NPV) of the project? Note: Express youranswers in strictly numerical terms. For example, if the answer is five million dollars, write5000000 as an answer.

Some financial managers prefer capital budgeting model such as internal rate of return (IRR) or no discounted payback models over the net present value (NPV) model, which is preferred by academic financial analysts. Why ? Briefly discuss.

Net Present Value calculations ignore the risks of the cash flows. True False