A Project with an NPV of Zero ______________

question 191

Multiple Choice

A project with an NPV of zero ______________.

• A) Should be rejected.
• B) Has a profitability index that is greater than one.
• C) Is expected to earn a return equal to the firm's required return.
• D) Has a discounted payback period that is shorter than the life of the project.
• E) Should be accepted even if the firm has alternative investments with a positive NPV.

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Definitions:

Convertible Bond

A type of bond that can be converted into a predetermined number of the issuer's equity shares at certain times during its life, usually at the discretion of the bondholder.

Coupon Rate

The annual coupon divided by the face value of a bond.

Conversion Ratio

The number of shares per bond received for conversion into stock.

Conversion Price

The predetermined price at which convertible security can be converted into a common stock.