If a project is assigned a required rate of return equal to zero, then:
A) The timing of the project's cash flows has no bearing on the value of the project.
B) The project will always be accepted.
C) The project will always be rejected.
D) Whether the project is accepted or rejected will depend on the timing of the cash flows.
E) The project can never add value for the shareholders.

Question

Quizplus · Accepted Answer

When a project is assigned a required rate of return equal to zero, it means that the present value of its cash flows is simply the sum of the cash flows without discounting. Therefore, the timing of the cash flows does not affect the valuation of the project, as no discounting is applied.

If a Project Is Assigned a Required Rate of Return