Which of the Following Best Defines Incremental Earnings

question 96

Multiple Choice

Which of the following best defines incremental earnings?

• A) cash flows arising from a particular investment decision
• B) the amount by which a firm's earnings are expected to change as a result of an investment decision
• C) the earnings arising from all projects that a company plans to undertake in a fixed time span
• D) the net present value (NPV) of earnings that a firm is expected to receive as the result of an investment decision

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Definitions:

Market Rate

The prevailing price or interest rate at which goods, services, or securities are traded in a competitive marketplace.

Shortage

A situation where the demand for a product or service exceeds the supply available at a specified price.

Usury Law

Legislation that sets maximum interest rates that can be charged on loans, to prevent excessive interest.

Market Equilibrium

A market state where the quantity supplied equals the quantity demanded, leading to a balance in price and volume.