Explanation of the term "implicit reinvestment assumption"?
With reference to the IRR method of capital investment evaluation, explain what is meant by "implicit reinvestment assumption". When might it cause a problem?
The explanation in the response explains the term and the consequences in the longer run.
Reinvestment Rate Assumption - 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?
Net Present Value (NPV), IRR, and MIRR methods - 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?
NPV, IRR, and MIRR - 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?