The NPV Method's Assumption That Cash Inflows Are Reinvested at the Cost

question 63

True/False

The NPV method's assumption that cash inflows are reinvested at the cost of capital is more reasonable than the IRR's assumption that cash flows are reinvested at the IRR. This makes the NPV method preferable to the IRR method.

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Definitions:

Performance Potential

Refers to the maximum level of productivity or achievement that an individual or group can attain under ideal circumstances.

Base Remuneration

Is a salary or hourly wage paid to an individual.

Fringe Benefits

Additional benefits supplementing an employee's salary, such as health insurance, paid vacations, and retirement plans, which are not paid directly as cash to an individual.

Qualified Employees

Workers who possess the necessary skills, education, and experience required to competently perform the tasks of a specific job.