In capital budgeting, a negative net present value results 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's discounted cash inflows are less than its investment cost, so it reduces value relative to the required return. This corresponds to negative economic value added in the question's terminology.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
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.
Practise Business Finance
975 free Business Finance MCQs from Management Sciences, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Management Sciences questions like this
Management Sciences is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Business Finance questions
The number of years forecasted to recover an original investment is classified as ___________?
In capital budgeting, the term of bond which has great sensitivity to interest rates is __________?
The process in which the managers of the company identify projects to add value is classified as __________?
In alternative investments, the constant cash flow stream is equal to initial cash flow stream in the approach which is classified as __________?
The payback period in which an expected cash flows are discounted with the help of project cost of capital is classified as __________?
The modified rate of return and modified internal rate of return with exceed cost of capital if the net present value is ____________?