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

question 101

True/False

The NPV method's assumption that cash inflows are reinvested at the cost of capital is generally more reasonable than the IRR's assumption that cash flows are reinvested at the IRR.This is an important reason why the NPV method is generally preferred over the IRR method.

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Definitions:

Acquired Fear

A type of fear that is learned through experience or conditioning, rather than innate.

White Rat

Commonly used in psychological experiments, particularly in behavioral studies, to understand learning and conditioning.

Generalization

In psychology, the tendency to respond in the same way to different but similar stimuli.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired together; a response that is initially elicited by the second stimulus is eventually elicited by the first stimulus alone.