The internal rate of return method assumes that the cash flows over the life of the project are reinvested at the ____.
A) risk-free rate
B) firm's cost of capital
C) computed internal rate of return
D) market capitalization rate

Question

Quizplus · Accepted Answer

The internal rate of return method assumes that the cash flows over the life of the project are reinvested at the computed internal rate of return. This means that the IRR is the expected rate of return that the project is expected to generate, and this rate is used to discount future cash flows to their present value. The assumption is that all cash flows are reinvested at this rate.

The Internal Rate of Return Method Assumes That the Cash