Some people believe firmly, even passionately, that ranking projects on IRR is OK if each projects cash
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Some people believe firmly, even passionately, that ranking projects on IRR is OK if each project’s cash flows can be reinvested at the project’s IRR. They also say that the NPV rule “assumes that cash flows are reinvested at the opportunity cost of capital.” Think carefully about these statements. Are they true? Are they helpful?
Opportunity CostOpportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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