If a project has a net present value equal to zero, then:
A) the total of the cash inflows must equal the initial cost of the project.
B) the project earns a return exactly equal to the discount rate.
C) a decrease in the project's initial cost will cause the project to have a negative NPV.
D) any delay in receiving the projected cash inflows will cause the project to have a positive NPV.
E) the project's PI must also be equal to zero.

Question

If a project has a net present value equal to zero, then: 
A) the total of the cash inflows must equal the initial cost of the project. 
B) the project earns a return exactly equal to the discount rate. 
C) a decrease in the project's initial cost will cause the project to have a negative NPV. 
D) any delay in receiving the projected cash inflows will cause the project to have a positive NPV. 
E) the project's PI must also be equal to zero.

Quizplus · Accepted Answer

When a project's net present value (NPV) is zero, it means that the project's cash inflows, discounted at the project's discount rate, are exactly equal to the initial investment. This implies that the project is earning a return exactly equal to the discount rate.

If a Project Has a Net Present Value Equal to Zero