The discount rate that yields a net present value of zero for an investment is the:
A) Net present value rate of return.
B) Zero rate of return.
C) Internal rate of return.
D) Payback rate of return.
E) Accounting rate of return.

Question

Quizplus · Accepted Answer

The discount rate that yields a net present value of zero for an investment is known as the internal rate of return (IRR). IRR is the rate at which the present value of cash inflows from an investment equals the cost of the investment. Therefore, option C is the correct answer. Option A is not correct as the net present value rate of return is not a standard finance term. Option B is not correct as the zero rate of return does not consider any discounts or cash flows. Option D is not correct as payback rate of return only considers the time it takes for an investment to recoup its initial cost. Option E is not correct as the accounting rate of return does not take into account the time value of money.

The Discount Rate That Yields a Net Present Value of Zero