As in domestic capital budgeting, a potential international project or capital budget will be considered a net benefit to the firms if

Question

Quizplus · Accepted Answer

A project will be considered a net benefit to the firm if its net present value (NPV) is greater than zero. This means that the project's expected cash inflows are greater than its cash outflows, and that the firm's value will increase by undertaking the project. The other options (B and C) are incorrect because they are not necessarily true indicators of a project's net benefit. The internal rate of return (IRR) measures the project's rate of return, but does not consider the magnitude of cash flows or risk. The comparison of IRR to the weighted average cost of capital (WACC) is important in determining the project's impact on the firm's overall cost of capital, but does not guarantee positive net benefits. And while a project's IRR can exceed its NPV, this is not a necessary condition for the project to be considered a net benefit. Therefore, the best choice is A.

As in Domestic Capital Budgeting, a Potential International Project or Capital