As the Discount Rate Is Increased,the NPV of a Specific

question 59

Multiple Choice

As the discount rate is increased,the NPV of a specific project will:

• A) increase.
• B) decrease.
• C) remain constant.
• D) decrease to zero, then remain constant.

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Definitions:

Average Rate of Return

A financial ratio that indicates the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price.

Capital Investment Analysis

The process of assessing the profitability and risk of potential investment opportunities involving capital expenditures.

Depreciation

Allocating the value of a tangible asset over the period it is expected to be used, in a systematic manner.