Explore BrainMass
Share

Reinvestment under IRR

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

When two mutually exclusive projects are considered, the NPV calculations and the IRR calculations may, under certain circumstances, give conflicting recommendations as to which project to accept. The reason for this result is that in the NPV calculation, cash inflows are assumed to be reinvested at the cost of capital, while in the IRR solution, reinvestment takes place at

the hurdle rate.
the accounting rate of return.
the prime rate.
the project's internal rate of return.

© BrainMass Inc. brainmass.com March 21, 2019, 3:36 pm ad1c9bdddf
https://brainmass.com/economics/macroeconomics/reinvestment-under-irr-157636

Solution Summary

The solution explains what is the reinvestment rate assumption in IRR.

$2.19