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Question 1: Sonoran Co recently evaluated an investment project that had an initial cash outlay followed by
positive annual net cash flows over its life. The company employed the internal rate of return (IRR)
and discounted payback period (DPP) methods for the investment appraisal. Later, it was discovered
that the cost of capital figure used was incorrect and that the correct figure was higher.
What will be the effect on the IRR and DPP of correcting for this error?
A. IRR = No change, DPP = No change
B. IRR = Increase, DPP = Increase
C. IRR = Decrease, DPP = Decrease
D. IRR = No change, DPP = Increase
Correct Answer: D
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10 days ago

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