"Economic profit" is analogous to ____ in capital budgeting.

Question

Quizplus · Accepted Answer

Both economic profit and net present value (NPV) are measures used to assess the profitability of an investment project. Economic profit considers both explicit (e.g. money spent on resources) and implicit (e.g. opportunity cost of using those resources) costs, while NPV discounts expected cash inflows and outflows back to present value using a discount rate that reflects the cost of capital. Both measures consider the time value of money and provide a way to compare investments with different costs and returns, making E the best choice.

"Economic Profit" Is Analogous to ____ in Capital Budgeting