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Accept/Reject Decision Under the IRR Method

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An increase in the firm's WACC will decrease projects' NPVs, which could change the accept/reject decision for any potential project. However, such a change would have no impact on projects' IRRs. Therefore, the accept/reject decision under the IRR method is independent of the cost of capital.

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The solution determines whether the statement "the accept/reject decision under the IRR method is independent of the cost of capital" is correct and why or why not.

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The statement is not correct. Although the IRR will not be affected by the change of WACC, an increase in WACC will increase the ...

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