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 Visit us at www.mhhe.com/bma Visit us at www.mhhe.com/bma 124 Part One Value

“assumes that cash flows are reinvested at the opportunity cost of capital.” Think carefully about these statements. Are they true? Are they helpful?

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