When the IRR Is Equal to the Discount Rate,the NPV

question 72

Multiple Choice

When the IRR is equal to the discount rate,the NPV is:

• A) positive.
• B) equal to zero.
• C) negative.
• D) cannot be determined without knowing the discount rate.

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Definitions:

Allowance for Uncollectible Accounts

A reserve set aside in the accounting books for debts that are expected not to be collected, reflecting realistic income figures.

Troubled Debt

Debt that the borrower is unable to pay back according to the original agreement, leading to restructuring or modification of terms.

Debt Restructuring

The process of renegotiating the terms of existing loans to provide a distressed borrower with relief, which may include reducing the interest rate, extending payment terms, or reducing the total amount owed.

Collateral

Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default.