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

Question

Quizplus · Accepted Answer

The problem of multiple discount rates resulting in an NPV of zero is referred to as "multiple rates of return." This occurs when the cash flows of an investment project have various signs, resulting in more than one discount rate that will provide an NPV of zero. This can make investment decisions complicated and challenging as there is no clear-cut way to determine the appropriate discount rate.

The Possibility That More Than One Discount Rate Will Make