The net present value method assumes that the cash inflows from a project are immediately reinvested at the

Question

Quizplus · Accepted Answer

The net present value (NPV) method assumes that the cash inflows from a project are immediately reinvested at the required rate of return. This is because the required rate of return represents the minimum rate of return that an investor expects to receive from an investment to compensate for the time value of money and the risk associated with the investment. The NPV method uses the required rate of return as the discount rate to calculate the present value of the cash flows, and compares it to the initial investment to determine whether the project is financially viable or not.

The Net Present Value Method Assumes That the Cash Inflows