An Increase in the Discount Rate Used in Computing the NPV

question 12

True/False

An increase in the discount rate used in computing the NPV of a project will lower the value of the NPV for that project.

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Definitions:

Marginal Revenue

The extra revenue gained by selling an additional unit of a product or service.

Economies of Scale

Cost advantages that entities attain due to the scale of operation, with costs per unit of output generally decreasing with increasing scale.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, measuring the performance exceeding opportunity costs.