fe of the project. Which one of the following statements is correct with respect to this reinvestment rate of cash inflows? Felect the correct response: Under both NPV and IRR the reinvestment rate is the risk-free rate of return. Under NPV and IRR the reinvestment rates are the cost of capital rate and the internal rate of return, respectively. Under NPV and IRR the reinvestment rates are the cost of capital rate and the risk-free rate of return, respectively. O Under NPV and IRR the reinvestment rates are the cost of capital rate and the asset risk premium rate, respectively.
fe of the project. Which one of the following statements is correct with respect to this reinvestment rate of cash inflows? Felect the correct response: Under both NPV and IRR the reinvestment rate is the risk-free rate of return. Under NPV and IRR the reinvestment rates are the cost of capital rate and the internal rate of return, respectively. Under NPV and IRR the reinvestment rates are the cost of capital rate and the risk-free rate of return, respectively. O Under NPV and IRR the reinvestment rates are the cost of capital rate and the asset risk premium rate, respectively.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 16MC: When using the NPV method for a particular investment decision, if the present value of all cash...
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Transcribed Image Text:The net present value (NPV) and the internal rate of return (IRR) capital budgeting methods make assumptions about the reinvestment rate of cash inflows over the
life of the project. Which one of the following statements is correct with respect to this reinvestment rate of cash inflows?
Select the correct response:
Under both NPV and IRR the reinvestment rate is the risk-free rate of return.
Under NPV and IRR the reinvestment rates are the cost of capital rate and the internal rate of return, respectively.
Under NPV and IRR the reinvestment rates are the cost of capital rate and the risk-free rate of return, respectively.
Under NPV and IRR the reinvestment rates are the cost of capital rate and the asset risk premium rate, respectively.
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