The Net Present Value (or NPV)criteria for capital budgeting decisions assumes that expected future cash flows are reinvested at ________,and the Internal Rate of Return (or IRR)criteria assumes that expected future cash flows are reinvested at ________.
A) the firm's discount rate; the internal rate of return
B) the internal rate of return; the internal rate of return
C) the internal rate of return; the firm's discount rate
D) Neither criteria assumes reinvestment of future cash flows.

Question

Quizplus · Accepted Answer

The NPV criteria assumes that expected future cash flows are reinvested at the firm's discount rate, while the IRR criteria assumes that expected future cash flows are reinvested at the internal rate of return.

The Net Present Value (Or NPV)criteria for Capital Budgeting Decisions