The modified rate of return and modified internal rate of return with exceed cost of capital if the net present value is ____________?
Correct answer: A. positive
- A. positive
- B. negative
- C. zero
- D. one
Explanation
When NPV is positive, the project's return exceeds its cost of capital, so its modified internal rate of return is also above that benchmark. A negative NPV would indicate the opposite relationship.
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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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