When there is an excess of expected net income over the cost of capital

Question

Quizplus · Accepted Answer

When there is an excess of expected net income over the cost of capital, abnormal net income is positive. Abnormal net income measures the difference between actual net income and expected net income, given the cost of capital. Positive abnormal net income indicates that the company is generating more income than anticipated, which is a good sign for the investors.

When There Is an Excess of Expected Net Income Over