Which of the following statements about comparing the techniques of net present value (npv) and internal rate of return (irr) is/are correct?
I. The net present value assumes that all cash flows are reinvested at the cost of capital and is therefore realistic.
II. The internal rate of return is stated as a percent and is therefore easy to communicate to decision-makers who may not understand the fine points of finance.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

Statement I is correct as the net present value takes into account the cost of capital, which is the rate of return required by investors to fund a project. Therefore, it is more realistic as it assumes that all cash flows are reinvested at the cost of capital. 
Statement II is also correct as the internal rate of return is stated as a percentage and can be easily communicated to decision-makers who may not have a background in finance. Therefore, both statements are correct.

Which of the Following Statements About Comparing the Techniques of Net