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

question 4

True/False

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:

Average Total Assets

The mean value of all assets owned by a company over a specific time period, used in financial analysis to measure efficiency and productivity.

Return

Return refers to the gain or loss on an investment over a specified period, including income received and capital gains or losses.