The ____ method assumes that the cash flows over the life of the project are reinvested at the ____.
A) net present value; computed internal rate of return
B) internal rate of return; firm's cost of capital
C) net present value; firm's cost of capital
D) net present value; risk-free rate of return
E) none of the above

Question

Quizplus · Accepted Answer

The net present value (NPV) method assumes that the cash flows over the life of the project are reinvested at the firm's cost of capital. This is because NPV calculates the value of a project by discounting future cash flows back to their present value using the firm's cost of capital as the discount rate.

The ____ Method Assumes That the Cash Flows Over the Life