When applying NPV and IRR methods to evaluate potential projects, both require use of a discount...

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When applying NPV and IRR methods to evaluate potential projects, both require use of a discount...

When applying NPV and IRR methods to evaluate potential projects, both require use of a discount rate. What is the discount rate used for NPV and IRR, respectively?

Group of answer choices

IRR; cost of capital

Cost of capital; IRR

Cost of capital; cost of capital

Cost of equity; cost of capital

business finance

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Answer 1

Answer #1

While Calculating NPV, Cash flows are discounted using Cost of Capital.

IRR is compared to Cost of Capital to determine whether the Project should be accepted or not.

Therefore, Discount rate used for NPV and IRR are Cost of Capital.

Answer : Cost of Capital, Cost of Capital

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Answer 2

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