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The internal rate of return method implicitly assumes intermediate receipts are reinvested at

  • A.the rate of inflation
  • B.the internal rate of return itself
  • C.the minimum attractive rate of return
  • D.zero per cent

Answer: B

That is what makes a very high computed rate suspect, since such returns are rarely available for reinvestment. The present worth method assumes reinvestment at the minimum attractive rate, which is the more defensible claim.

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