What capital investment decision-making model assumes that each cash inflow is reinvested at the project's own rate of return?

Question

Quizplus · Accepted Answer

The internal rate of return assumes that each cash inflow is reinvested at the project's own rate of return, leading to a more accurate measure of a project's profitability. The payback period and accounting rate of return do not account for reinvestment, while the net present value assumes that cash inflows are reinvested at the firm's cost of capital, not the project's rate of return.

What Capital Investment Decision-Making Model Assumes That Each Cash Inflow