What is the reinvestment rate assumption
To explain: The reinvestment rate assumptions that are built into the NPV, IRR and MIRR methods. Introduction: Net Present Value (NPV): It is a method under capital budgeting which includes the calculation of net present value of the project in which the company is investing. The Myth of The Reinvestment Rate Assumption. One of the most commonly cited limitations of the IRR is the so called “reinvestment rate assumption.” In short, the reinvestment rate assumption says that the IRR assumes interim cash flows are reinvested at the IRR, which of course isn’t always feasible.