NPV vs IRR: Project Evaluation

Cash inflows are not reinvested

Cash inflows are reinvested at the cost of capital (correct)

Cash inflows are reinvested at the project's IRR

Cash inflows are reinvested at a fixed rate

Because of the upstream uncertainty

Because of the lower predictability of early year cash inflows

Because of the higher cost of capital in later years

Because of the downstream uncertainty (correct)

Differences in project duration

Differences in the magnitude and timing of the cash inflows (correct)

Differences in the cost of capital

Differences in the type of project

<p>NPV approach</p> Signup and view all the answers

<p>They are more predictable and at a lower cost of capital</p> Signup and view all the answers