If the Required Return Is Zero, Then

question 63

Multiple Choice

If the required return is zero, then:

• A) The payback period exceeds the discounted payback period.
• B) The NPV equals the difference between the undiscounted future cash flows and the initial cost.
• C) If the NPV is negative, the IRR will be greater than zero.
• D) The PI will be less than one.
• E) The project will be acceptable according to the AAR criteria.

---

Definitions:

Marginal Revenue

The additional income that a firm receives from selling one more unit of a good or service.

Average Revenue

The average amount of money received by a firm per unit of output sold, calculated by dividing the total revenue by the number of units sold.

Marginal Cost

The uptick in price resulting from the manufacture of an extra unit of a good or service.

Monopoly Firm

A company that is the sole provider of a product or service in a market, facing no competition.