Virunga Co uses the net present value (NPV) method, the internal rate of return (IRR) method and payback period (PP) to appraise its new investment opportunities. An investment opportunity was recently appraised using each of these methods and was estimated to provide a positive NPV of $10 million, an IRR of 15% and a Pay Back (PB) of three years. Following this appraisal, it was discovered that the cost of capital of the company was lower than had been previously estimated. What would be the effect (increase/decrease/no effect) on the figures provided by each investment appraisal method (NPV, IRR and PB) of taking account of the lower cost of capital?

1. NPV Increase; IRR No effect; PB No effect

2. NPV No effect; IRR Decrease; PB No effect

3. NPV Decrease; IRR No effect; PB Increase

4. NPV Increase; IRR Increase; PB Decrease