The NPV Method Assumes That Cash Inflows Are Reinvested at The

question 46

Multiple Choice

The NPV method assumes that cash inflows are reinvested at the:

• A) internal rate of return.
• B) firm's cost of capital.
• C) average yield on corporate bonds.
• D) average yield from an equity index fund.
• E) risk-adjusted hurdle rate.

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Definitions:

Convergent Thinking

Thinking that produces the single best solution to a problem.

Deductive Reasoning

A thought process wherein a verdict is reached through the consistency of numerous claims that are often regarded as correct.

Inductive Reasoning

An intellectual procedure where various propositions, all assumed to be true or generally true, are merged to derive a distinct outcome.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.