If the Net Present Value of a Project Is Zero

question 61

Multiple Choice

If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:

• A) equal to 16%.
• B) less than 16%.
• C) greater than 16%.
• D) cannot be determined from this data.

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Definitions:

Compounded Semiannually

A method of computing interest where the interest is added to the principal twice a year, leading to interest being earned on interest from the next period.

Semiannual Compounding

Refers to the process of applying interest to a principal amount twice a year, resulting in interest being calculated on previously earned interest as well as the principal.

Calgary Real Estate Board

An industry association in Calgary, Alberta, that provides resources and support to real estate professionals.

Compound Increase

An increase where interest is calculated on the initial principal and also on the accumulated interest of previous periods.