Net present value break-even is reached
A)after the time period when NPV finally turns from negative to positive.
B)at the discount rate that produces an NPV of $0.00.
C)at the level of sales over the life of the project that results in free cash flow of $0.000 for a given period.
D)at the level of sales over the life of the project that results in an NPV of $0.00.

Question

Quizplus · Accepted Answer

The break-even point in NPV occurs at the level of sales that results in an NPV of $0.00. This means that the project has generated enough cash flows to cover its initial investment and required rate of return. A and C are incorrect because they refer to the point where NPV turns from negative to positive or free cash flow equals zero, respectively, which do not necessarily represent the break-even point. B is also incorrect because a discount rate that produces an NPV of $0.00 does not necessarily represent the break-even point in terms of sales or cash flows.

Net Present Value Break-Even Is Reached