If the Net Present Value of an Investment Is Zero

question 123

True/False

If the net present value of an investment is zero, the investment earns less than the minimum required rate of return.

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Definitions:

Preferred Stock

A class of ownership in a corporation with a specified dividend that is paid out before dividends to common stockholders and typically does not carry voting rights.

Annual Dividend

The total dividend payment a shareholder receives from a company in one year, often expressed as an amount per share.

Efficient Markets

A theory that suggests that financial markets are "efficient" in reflecting information about stock prices at all times.

Expected NPV

The anticipated value of the net present value of an investment, taking into account the probability of different outcomes.