The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the:
A) required return.
B) zero-sum rate.
C) present value rate.
D) break-even rate.
E) crossover rate.

Question

The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the: 
A) required return. 
B) zero-sum rate. 
C) present value rate. 
D) break-even rate. 
E) crossover rate.

Quizplus · Accepted Answer

The IRR that causes the NPV of the difference between two projects' cash flows to be zero is called the crossover rate. This is the rate at which the cash flows of the two projects intersect, making the decision between the two projects dependent on which project has a higher initial investment. The crossover rate helps determine the threshold at which one project becomes more profitable than the other.

The IRR That Causes the Net Present Value of the Differences