The Net Present Value Method Assumes That Cash Flows Are

question 61

Multiple Choice

The net present value method assumes that cash flows are reinvested at the ____, whereas the internal rate of return method assumes that cash flows are reinvested at the ____.

• A) discount rate; required rate of return
• B) cost of capital; market rate of return
• C) firm's cost of capital; computed internal rate of return
• D) marginal cost of capital; discount rate

---

Definitions:

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from total revenue.

Retained Earnings

Profits that a company keeps after dividends have been paid out, which may be used for investment or to pay off debt.

Retention Ratio

The proportion of net income that is retained rather than distributed to shareholders as dividends.

Selling And Administrative Expenses

Operating expenses related to selling products and managing the business, not directly tied to production.