In capital budgeting, a negative net present value result in______________?
Correct answer: C. Negative economic value added
- A. Zero economic value added
- B. Percent economic value added
- C. Negative economic value added
- D. Positive economic value added
Explanation
A negative NPV means the project is expected to reduce shareholder wealth after covering the cost of capital, which corresponds to negative economic value added. Positive EVA requires returns above the required cost of capital.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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