Examlex
On a purely theoretical basis, NPV is the better approach to capital budgeting than IRR because NPV implicitly assumes that any intermediate cash inflows generated by an investment are reinvested at the firm's cost of capital.
Cash Inflows
The total amount of money received by a company during a specific period, including revenues, investments, and financing.
Net Present Value
A method used in capital budgeting to assess the profitability of an investment by calculating the present value of all cash inflows and outflows.
Rate Of Return
A financial ratio that calculates the profit or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.
Present Value
The current worth of a future sum of money or stream of cash flows, given a specified rate of return.
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