The net present value method assumes that cash flows are reinvested at the ____, whereas the internal rate of return method assumes that cash flows are reinvested at the ____.
A) discount rate; required rate of return
B) cost of capital; market rate of return
C) firm's cost of capital; computed internal rate of return
D) marginal cost of capital; discount rate

Question

Quizplus · Accepted Answer

The net present value (NPV) method assumes cash flows are reinvested at the firm's cost of capital, while the internal rate of return (IRR) method assumes reinvestment at the computed IRR.

The Net Present Value Method Assumes That Cash Flows Are