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When the cost of capital (or discount rate) increases, the IRR of a project: Question 24...

When the cost of capital (or discount rate) increases, the IRR of a project:

Question 24 options:

increases.

decreases.

is unaffected.

cannot be determined without knowing the discount rate.

None of the above.
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Answer #1

IRR is independent of WACC. WACC represents the Required rate of return of the Debtholders and stockholders. While IRR tell the Return that is provided by the Cash Inflows of the project in respect to the Cash Outflow of the project.

Therefore the correct option is Option 3 ; is unaffected.

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Answer #2

increases?

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