By definition, the net present value is equal to zero when the discount rate is equal to the:
A) Average account rate of return.
B) Rate used in the discounted payback formula.
C) Profitability index rate.
D) Internal rate of return.
E) Crossover rate.

Question

Quizplus · Accepted Answer

The net present value (NPV) equals zero when the discount rate is equal to the project's internal rate of return (IRR). This is because the IRR is the discount rate at which the present value of a project's cash inflows equals the present value of its cash outflows, resulting in a net present value of zero.

By Definition, the Net Present Value Is Equal to Zero