CIMA Advanced Management Accounting P2 Question # 25 Topic 3 Discussion

CIMA Advanced Management Accounting P2 Question # 25 Topic 3 Discussion

P2 Exam Topic 3 Question 25 Discussion:
Question #: 25
Topic #: 3

You have just assessed an investment proposal, involving an immediate cash outflow followed by a series of cash inflows over the next 7years, by deducing the NPV and the IRR. You have now discovered that you have

underestimated the discount rate.

Correcting the underestimation will have the following effect, relative to your original deductions:


A.

NPV will reduce, IRR will not change


B.

NPV and IRR will not change


C.

NPV will increase, IRR will reduce


D.

NPV and IRR will both increase


E.

Not enough information given for an answer


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