If a proejct has a net present value equal to zero, then: The present value of the cash inflows exceeds the initial cost of the project. The project produces a rate of return that equals the required rate of return. The project will not increase the value of the company. Any delay in receiving the projected cash inflows will casue the project to have a negative net present value. 1, 2, and 3 only 1, 2, and 4 only 2, and 3 only. 2, and 4 only. 2, 3, and 4 only.

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Business

Lauryn Vasquez

27 July, 22:06

If a proejct has a net present value equal to zero, then: The present value of the cash inflows exceeds the initial cost of the project. The project produces a rate of return that equals the required rate of return. The project will not increase the value of the company. Any delay in receiving the projected cash inflows will casue the project to have a negative net present value. 1, 2, and 3 only 1, 2, and 4 only 2, and 3 only. 2, and 4 only. 2, 3, and 4 only.

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Answers (1)

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Makena Day · Answer 1

The correct option is 2,3 and 4 only

Explanation:

If the net present value is zero it means that present of project's cash inflows is the same as the initial cost of project not that it exceeds it, hence option 1 is wrong.

However, a zero net present value means that the investment produces the exact required rate of return which is the internal rate of return, a rate at which present value of inflows equate initial project outlay.

Also, any delay in receiving project's inflows say by year would mean that the discount factor applied is lower resulting in a lower present value of cash such cash inflow and a negative net present value overall.