A project that has been under review for some time has been modified so that the cash receipts will remain the same, but their timing will be brought forward throughout the length of the project. How will this affect the project’s internal rate of return and net present value (using a positive risk discount rate)? A The internal rate of return and net present value will both decrease. B The internal rate of return and net present value will both increase. C The internal rate of return will increase and the net present value will decrease. D The internal rate of return will decrease and the net present value will increase May I know why the answer is B?
The IRR and NPV will increase because an income that is happening at the end of the year is happening at the start of the year. So you will be discounting for one year less now. So as your IRR goes up, NPV will also go up.
