When a Capital Budgeting Project Generates a Positive Net Present

question 1

Multiple Choice

When a capital budgeting project generates a positive net present value, this means that the project earns a return higher than the

• A) internal rate of return.
• B) annual rate of return.
• C) required rate of return.
• D) profitability index.

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Definitions:

Economic Profits

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, representing the excess over the opportunity cost.

Perfect Competition

A market structure characterized by a complete lack of friction or impediments to the entry of new firms, where all sellers and buyers have access to the same information and no individual entity can influence the market price.

Market Price

The present cost at which a service or asset is available for purchase or sale.

Perfect Competitor

A theoretical market structure where many buyers and sellers exchange identical products, and no single entity can influence the market price.