Which of the Following Statements Is Most Correct

question 16

Multiple Choice

Which of the following statements is most correct?

• A) The NPV method assumes that cash flows will be reinvested at the cost of capital while the IRR method assumes reinvestment at the IRR.
• B) The NPV method assumes that cash flows will be reinvested at the risk free rate while the IRR method assumes reinvestment at the IRR.
• C) The NPV method assumes that cash flows will be reinvested at the cost of capital while the IRR method assumes reinvestment at the risk-free rate.
• D) The NPV method does not consider the inflation premium.
• E) The IRR method does not consider all relevant cash flows, and particularly cash flows beyond the payback period.

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Definitions:

Appellate Court

A court that reviews the decisions of lower courts to determine if legal errors were made that could change the outcome of a case.

Disposition

The final settlement or conclusion of a court case or legal matter.

Affirmed

A term used in law to indicate that a decision made at a lower court level is confirmed by a higher court.

Reversed

A legal term referring to a court's decision to overturn or annul a previous judgment or ruling.