The possibility that more than one discount rate will make the NPV of an investment equal to zero is called the _______ problem.
A) net present value profiling
B) operational ambiguity
C) mutually exclusive investment decision
D) issues of scale
E) multiple rates of return

Question

Quizplus · Accepted Answer

The possibility that more than one discount rate will make the NPV of an investment equal to zero is referred to as the multiple rates of return problem. This is typically seen when there are non-conventional cash flows, such as initial cash outflows followed by inflows, or inconsistent cash flows. It makes decision-making complex since it is challenging to choose a discount rate when the problem presents multiple rates of return.

The Possibility That More Than One Discount Rate Will Make