The net present value method assumes that cash flows from a project are immediately reinvested at a rate of return equal to the discount rate.

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The net present value (NPV) method assumes that cash flows from a project are immediately reinvested back into the project at the same discount rate used to calculate the NPV. This assumes that the cash flows can be reinvested at the same rate of return and that there are no taxes or other costs associated with reinvesting the cash flows.

The Net Present Value Method Assumes That Cash Flows from a Project