Imagine a situation where a manufacturer can either upgrade an existing machine by investing very little money or replace it with a new machine that is very costly. In the following years, the manufacturer would be able to produce at much lower costs if they replaced the machine. The output quantity and the lifetime of both machines would be identical. Both machines will have a salvage value of $0 at the end. There are no taxes.

Assume that the accountant found that, at a 10% discount rate, the upgrade alternative has an NPV of ($260,000) and the replace alternative has an NPV of ($240,000). The CEO reviews the calculation and is concerned that the accurate discount rate should be higher. She says: "At some point, when we keep increasing the rate, the decision that your calculation suggests will flip." Is this true?