If a project has a zero net present value, then the internal rate of return will be
A) less than the discount rate.
B) greater than the discount rate.
C) equal to the discount rate.
D) a negative rate of return.

Question

Quizplus · Accepted Answer

A zero net present value means that the project's cash inflows are equal to its cash outflows, resulting in no gain or loss. If the internal rate of return (IRR) is equal to the discount rate, then the project's cash inflows are being discounted at the rate that reflects their risk and opportunity cost, resulting in a zero NPV. Therefore, the IRR will be equal to the discount rate in this scenario.

If a Project Has a Zero Net Present Value, Then