There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to:
A) have two net present value profiles.
B) have operational ambiguity.
C) create a mutually exclusive investment decision.
D) produce multiple economies of scale.
E) have multiple rates of return.

Question

There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to: 
A) have two net present value profiles. 
B) have operational ambiguity. 
C) create a mutually exclusive investment decision.
D) produce multiple economies of scale. 
E) have multiple rates of return.

Quizplus · Accepted Answer

If a project has two distinct discount rates at which it has a zero net present value, it means that there are multiple rates of return. This indicates that the project has multiple potential outcomes and could result in different levels of profitability depending on the discount rate used. Therefore, the correct answer is E, which states that the project has multiple rates of return.

There Are Two Distinct Discount Rates at Which a Particular