If the required return is zero, then:
A) The payback period exceeds the discounted payback period.
B) The NPV equals the difference between the undiscounted future cash flows and the initial cost.
C) If the NPV is negative, the IRR will be greater than zero.
D) The PI will be less than one.
E) The project will be acceptable according to the AAR criteria.

Question

Quizplus · Accepted Answer

When the required return is zero, the NPV calculation does not discount future cash flows, making the NPV equal to the sum of the undiscounted future cash flows minus the initial cost. This is because discounting at a 0% rate effectively leaves cash flows unchanged.

If the Required Return Is Zero, Then