As the Discount Rate Increases,the IRR of a Project

question 45

Multiple Choice

As the discount rate increases,the IRR of a project:

• A) increases.
• B) decreases.
• C) is unaffected.
• D) cannot be determined with out knowing the discount rate.

---

Definitions:

Total Gross Margin

The difference between the sales revenue and the cost of goods sold, indicating the total profitability from goods sold.

Absorption Costing

A pricing approach that encompasses all costs related to production - including direct materials, direct labor, as well as both variable and fixed overhead expenses - within the product’s cost.

Absorption Costing

A method of accounting that includes all manufacturing costs, both variable and fixed, in the valuation of inventory and cost of goods sold.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.