What does it mean when a capital budgeting project has an NPV of zero? The project’s...

What does it mean when a capital budgeting project has an NPV of zero?

The project’s IRR will be less than the required hurdle rate for the project
The firm’s stockholders will earn a positive return, but it will be less than their required return, given the risk of the investment
The firm’s security holders will earn their required rate of return, given the risk of the investment
The firm’s stockholders will earn a negative return
none of the above

Expert Solution

Correct statement is :-The firm's security holders will earn their required rate of return ,given the risk of the Investment

Explanation :-We know that IRR is the rate at which NPV of project becomes 0 and given that when project cash flows are discounted using required rate of return or discount rate then also,NPV was 0 .It meann IRR which is internal rate of return is equal to Required rate of return .Hence firm is earning the return which was required .

jeff jeffy answered 2 years ago

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