Which of the Following Statements Is Correct

question 104

Multiple Choice

Which of the following statements is correct?

• A) The NPV method assumes that cash flows will be reinvested at the required rate of return 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 required rate of return 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:

Exponent

A mathematical notation indicating the number of times a base is multiplied by itself, also known as "power" or "index".

Whole Number

A whole number that is not a fraction or decimal.

Whole Number

An integer value that is not fractional or decimal, positive, negative, or zero.

Implied Decimal

A decimal point not explicitly shown but understood in the context of the number.