5. The IRR method assumes that cash flows are reinvested at the IRR. The NPV method assumes thatcash flows are reinvested at the required rate of return (market rate).1230-400 220 410 0Project B -400 220 190 260Project ANPV @13%115.78123.68IRR32.411%30.00%Adjust project A's cash flows using the reinvestment assumptions and explain why the ranking bydifferent methods differ.

The modified Internal rate of return or the MIRR is an extension of the IRR used to assess the…

Answered: Adjust project A's cash flows using the…

Adjust project A's cash flows using the reinvestment assumptions and explain why the ranking by different methods differ.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

5. The IRR method assumes that cash flows are reinvested at the IRR. The NPV method assumes that
cash flows are reinvested at the required rate of return (market rate).
1
2
3
0
-400 220 410 0
Project B -400 220 190 260
Project A
NPV @13%
115.78
123.68
IRR
32.411%
30.00%
Adjust project A's cash flows using the reinvestment assumptions and explain why the ranking by
different methods differ.

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