Question:
In what sense is a reinvestment rate assumption embodied in the NPV, IRR, and MIRR methods? What is the assumed reinvestment rate of each method?
As a financial officer, you must determine which project your company should accept. The projects are mutually exclusive and the net present value (NPV) calculations for each take into account the project's risk. Indicate which project (A or B) you would recommend and explain your reasons for this recommendation.
Project: A
NPV: 3 million dollars
RISK LEVEL: very risky
Project: B
NPV: 2.5 million dollars
RISK LEVEL: very safe