IRR and NPV You are out having dinner with your two colleagues who are also studying finance.
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IRR and NPV You are out having dinner with your two colleagues who are also studying finance. John, who loves the IRR method, tells you that ranking projects by IRR is fine as long as each project’s cash flows can be reinvested at the project’s IRR. Your other friend, Beverley, is confused and asks whether NPV assumes that cash flows are always reinvested at the opportunity cost of capital. Take a deep breath and explain whether John and Beverley are correct. Explain to John and Beverley an appropriate method that addresses this issue.
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