Under the net present value method, cash flows are assumed to be reinvested at the firm's weighted average cost of capital.

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Quizplus · Accepted Answer

This is true. The NPV method assumes that cash flows are reinvested at the firm's weighted average cost of capital, which represents the cost of financing the firm's operations through a combination of debt and equity. This assumption allows the NPV method to account for the time value of money and the opportunity cost of investing funds in a particular project.

Under the Net Present Value Method, Cash Flows Are Assumed