The 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
Economic life is the period over which an asset provides the most economically beneficial service, commonly the life that maximizes its value or net present value. It differs from physical life, which is simply how long the asset can operate.
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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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