In capital budgeting, the positive net present value results in _________?
Correct answer: B. positive economic value added
- A. negative economic value added
- B. positive economic value added
- C. zero economic value added
- D. percent economic value added
Explanation
A positive NPV means the project earns more than the required return and adds value to the firm. In value-based performance terms, this corresponds to positive economic value added.
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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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