If a project has a net present value equal to zero, then: I.the present value of the cash inﬂows exceeds the initial cost of the project.
II)the project produces a rate of return that just equals the rate required to accept the project.
III)the project is expected to produce only the minimally required cash inﬂows.
IV)any delay in receiving the projected cash inﬂows will cause the project to have a negative net.
A)II and III only.
B)II and IV only.
C)I, II, and IV only.
D)II, III, and IV only.
E)I, II, and III only.

Question

Quizplus · Accepted Answer

The net present value (NPV) of a project is the difference between the present value of the cash inflows and the initial cost of the project. If the NPV is equal to zero, then the present value of the cash inflows is equal to the initial cost of the project. This means that the project is expected to produce a rate of return that just equals the rate required to accept the project. It also means that the project is expected to produce only the minimally required cash inflows. Any delay in receiving the projected cash inflows will cause the project to have a negative NPV.

If a Project Has a Net Present Value Equal to Zero