The net present value method is a better method of evaluation than the internal rate of return method because the NPV method

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The NPV method assumes that cash flows can be reinvested at the firm's more conservative cost of capital, which is a more realistic assumption than assuming reinvestment at the internal rate of return. The IRR method assumes cash flows can be reinvested at the IRR, which may not be possible in reality. The NPV method is not necessarily more liberal than the IRR method.

The Net Present Value Method Is a Better Method of Evaluation