Virunga Co uses the net present value (NPV) method, the internal rate of return (IRR) method and discounted payback period (DPP) to appraise its new investment opportunities. An investment opportunity was recently appraised using each of these methods and was estimated to provide a positive NPV of $10·5 million, an IRR of 15% and a DPP of three years. Following this appraisal, it was discovered that the cost of capital of the company was lower than had been previously estimated.

What would be the effect (increase/decrease/no effect) on the figures provided by each investment appraisal method of taking account of the lower cost of capital?

Answer rating: 100% (QA)

Heres the effect of a lower cost of capital on each investment appraisal method for Virunga Co Metho... View the full answer