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? MCQ with Answer and Explanation
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?
A. S1 only
B. Neither S1 nor S2
C. Both S1 and S2
D. S2 only
Answer: Option C
Solution (By JKSSB Mock Tests)
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.
Explanation:
SEBI regulates the capital markets to protect investors and promote development. It was initially set up by an executive resolution in 1988, but it was given statutory powers by the SEBI Act, 1992. S1 is correct, S2 is incorrect as it is now a statutory body.
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