What Will Happen to the Net Present Value (NPV)of a Project

question 116

Multiple Choice

What will happen to the net present value (NPV) of a project if the discount rate is increased from 8% to 10%?

• A)NPV will always decrease.
• B)NPV will always increase.
• C)The discount rate change will not affect NPV.
• D)We cannot determine the direction of the effect on NPV from the information provided.

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Definitions:

Confidence Coefficient

The probability level, associated with a confidence interval, that the true parameter lies within the interval.

Interval Estimation Procedure

A method of estimating the range of values where a population parameter lies, based on sample statistics.

Population Parameter

A numerical value that summarizes an aspect of a population, such as its mean, variance, or standard deviation.