S1: In financial management, the 'Net Present Value' (NPV) method assumes that cash inflows are reinvested at the cost of capital. S2: The 'Internal Rate of Return' (IRR) method assumes that cash inflows are reinvested at the IRR itself. Which statement(s) is/are correct?
Explanation:
Both statements correctly identify the reinvestment rate assumptions of the two capital budgeting techniques. NPV assumes reinvestment at the cost of capital (discount rate), while IRR assumes reinvestment at the IRR.
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