An analyst at an investment firm is trying to decide which tool to use to evaluate an investment opportunity W the firm is considering. The analyst has narrowed the choices down to the net present value (NPV) and internal rate of return (IRR). What is an advantage of using the NPV that is not also an advantage of the IRR? NPV calculates the value added to the firm. NPV considers the time value of money. NPV considers the timing of future cash flows. NPV is based on assumptions provided by the firm. Which statement correctly describes the effect of inflation? Inflation decreases over time and thus increases the future cash flows of the investment. Inflation affects the purchasing power of the original investment. Inflation causes capital constraints that prevent a company from taking on multiple projects. Inflation provides an incentive for a company to avoid high-risk investments. A financial manager is evaluating a project and calculates a net present value (NPV) of $1, an internal rate of return (IRR) of 12.01\%, and a profitability index (PI) of 1.01. The estimated cost of capital is 12\%. After making these calculations, the manager realizes that the inflation rate was underestimated. How will this affect the NPV of the project? NPV will change in proportion to IRR. NPV will decrease. NPV will increase. NPV will stay the same