What will be the effect on the calculated net present value (NPV) and the payback period?

The management accountant has completed the appraisal of an investment in new office equipment.

It has now been discovered that the cost of capital used in the appraisal should have been higher.

What will be the effect on the calculated net present value (NPV) and the payback period?
A . NPV increase; payback period increase
B . NPV decrease; payback period decrease
C . NPV decrease; payback period stay the same
D . NPV decrease; payback period increase

View Answer

Answer: C