Suppose you have an investment that costs $80,000 at the beginning of the project,and it generates $30,000 a year for four years in positive cash flows.The cost of capital is 12%.The IRR of the project is 18.45% and the NPV is about $11,120.The IRR model assumes that at the end of the first year you can invest the $30,000 at ________.

Question

Quizplus · Accepted Answer

The IRR model assumes that positive cash flows can be reinvested at the IRR itself, which in this case is 18.45%.

Suppose You Have an Investment That Costs $80,000 at the Beginning