The relationship between Economic Value Added (EVA) and the 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 both measure value created after charging for invested capital, so higher EVA is associated with higher NPV. Their relationship is therefore direct rather than inverse.
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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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