Which of the following statements is correct? The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR. O The IRR method does not consider all relevant cash flows, particularly cash flows beyond the payback period. O The NPV method assumes that cash flows will be reinvested at the risk- free rate, while the IRR method assumes reinvestment at the IRR. The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the risk-free rate.
Which of the following statements is correct? The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR. O The IRR method does not consider all relevant cash flows, particularly cash flows beyond the payback period. O The NPV method assumes that cash flows will be reinvested at the risk- free rate, while the IRR method assumes reinvestment at the IRR. The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the risk-free rate.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 16MC: When using the NPV method for a particular investment decision, if the present value of all cash...
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Transcribed Image Text:Which of the following statements is correct?
The NPV method assumes that cash flows will be reinvested at the
WACC, while the IRR method assumes reinvestment at the IRR.
O The IRR method does not consider all relevant cash flows, particularly
cash flows beyond the payback period.
The NPV method assumes that cash flows will be reinvested at the risk-
free rate, while the IRR method assumes reinvestment at the IRR.
O The NPV method does not consider all relevant cash flows, particularly
cash flows beyond the payback period.
The NPV method assumes that cash flows will be reinvested at the
WACC, while the IRR method assumes reinvestment at the risk-free rate.
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