Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as____________?
Correct answer: C. Direct relationship
- A. Valued relationship
- B. Economic relationship
- C. Direct relationship
- D. Inverse relationship
Explanation
EVA and NPV generally have a direct relationship because both increase when a project earns returns above its cost of capital. Higher value creation through EVA is therefore associated with higher NPV.
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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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