The Net Present Value (NPV) method for making investment decisions has the following advantages over the Internal Rate of Return (IRR) method:
A) NPV considers the decision-maker's required rate of return when evaluating cash flows
B) NPV considers the size of a project whereas IRR does not
C) NPV assumes the same reinvestment rate for all projects, thereby being a correct measure of the true opportunity cost of a project
D) All of the above are true
E) A and B only

Question

Quizplus · Accepted Answer

NPV considers the decision-maker's required rate of return, the size of a project, and assumes the same reinvestment rate for all projects, making it a correct measure of the true opportunity cost of a project.

The Net Present Value (NPV) Method for Making Investment Decisions