In performing capital budgeting analysis that takes time value of money into account,cash flows generated by a capital project are assumed to be reinvested at the project's rate of return.

Question

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In capital budgeting analysis that considers the time value of money, cash flows generated by a capital project are typically assumed to be reinvested at the firm's cost of capital or the discount rate, not the project's rate of return.

In Performing Capital Budgeting Analysis That Takes Time Value of Money