If a Firm Considering the Purchase of an Asset Determines

question 35

Multiple Choice

If a firm considering the purchase of an asset determines that the asset's net present value is greater than zero, then _____ the asset will _____ profits.

• A)not buying; increase
• B)purchasing; increase
• C)purchasing; decrease
• D)not buying; decrease

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Definitions:

Equity

The value of an ownership interest in a company, calculated as company assets minus its liabilities and representing the net assets owned by shareholders.

Acquisition Date

The exact date on which control of a business is obtained by the acquirer, upon which the acquirer applies acquisition accounting.

Non-controlling Interest

The portion of equity interest in a subsidiary not attributable to the parent company.

Retained Earnings

The portion of net profits not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.