Life that maximizes net present value of an asset is classified as__________?
Correct answer: C. Economic life
- A. Minimum life
- B. Present value life
- C. Economic life
- D. Transaction life
Explanation
The economic life of an asset is the period for which its use produces the highest present value of benefits relative to costs. It is therefore the asset life that maximizes NPV, not merely its physical or transaction life.
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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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