The reinvestment assumption is a downside of the internal rate of return method of analysis because it assumes that cash flows are reinvested at the cost of capital.

Name: The reinvestment assumption is a downside of the internal rate of return method of analysis because it assumes that cash flows are reinvested at the cost of capital.
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It actually assumes that cash flows are reinvested at the IRR rate, which can sometimes be excessively high, rendering this assumption unrealistic.

The Reinvestment Assumption Is a Downside of the Internal Rate