Which of the following statements is CORRECT?
A) One defect of the IRR method is that it does not take account of cash flows over a project's full life.
B) One defect of the IRR method is that it does not take account of the time value of money.
C) One defect of the IRR method is that it does not take account of the cost of capital.
D) One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future.
E) One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself,and that assumption is often not valid.

Question

Quizplus · Accepted Answer

The IRR assumes reinvestment at the IRR,and that is generally not as valid as assuming reinvestment at the WACC,which is the reinvestment rate assumption of the NPV method.

Which of the Following Statements Is CORRECT