A project has NPV of zero. This means:
AThe project should be rejected
BThe project is loss-making
CThe project earns exactly the required rate of return
DIRR is infinite
Answer & Solution
Correct answer: C. The project earns exactly the required rate of return
1. NPV = 0 means PV of inflows = Initial outlay at the cost of capital.
2. The project earns exactly the required rate (IRR = discount rate).
3. Neither destroys nor adds value — generally accepted at the margin.
_Source: ICAI BoS CA Inter Paper 6A, Ch 7 "Investment Decisions", §7 — NPV_