Toomas evaluates a profitable investment project with a normal cash flow pattern

Finance Jan 19, 2021

Toomas evaluates a profitable investment project with a normal cash flow pattern. Assume that when performing a sensitivity analysis, all project cash flows (including initial investment, annual operating cash flows, and closing cash flows) are doubled, the most likely impact is that: Select one: a. IRR increases and NPV stays constant b. both IRR and NPV stay constant C. IRR stays constant and NPV increases d. IRR increases and NPV decreases

Expert Solution

Option c. is correct

When all project cash flows are doubled, IRR stays the same. However, the NPV is also doubled.

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