The net present value method implicitly makes the reasonable assumption that any interim cash flows from the project are reinvested at the firm's internal rate of return.

Name: The net present value method implicitly makes the reasonable assumption that any interim cash flows from the project are reinvested at the firm's internal rate of return.
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Question

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The net present value (NPV) method assumes that interim cash flows are reinvested at the firm's cost of capital, not the internal rate of return (IRR).

The Net Present Value Method Implicitly Makes the Reasonable Assumption