Vidyalelo
Commerce · Q465

Financial Management

Graduate and Post Graduate · Commerce · question 465

Q465

In capital budgeting, a negative net present value results in

A.
zero economic value added
B.
percent economic value added
C.
negative economic value added
Answer
D.
positive economic value added

Answer: Option C

Solution

Answer: Option C
Solution:
Economic value added is the incremental difference in the rate of return over a company's cost of capital. In essence, it is the value generated from funds invested in a business. If the economic value added measurement turns out to be negative, this means that management is destroying the value of the funds invested in a business