When a capital budgeting project generates a positive net present value, this means that the project earns a return higher than the internal rate of return.
For better understanding, lets explain what capital budgeting means
- Capital Budgeting is simply known as the process of evaluating and selecting long-term investments that are always in line with an organisation's goal of maximizing owners' wealth. the four main administrative steps to the capital budgeting process includes idea generation
, analyzing project proposals
, create the firm-wide capital budget and monitoring decisions and conducting a post-audit
from the above, we can therefore say that the answer When a capital budgeting project generates a positive net present value, this means that the project earns a return higher than the internal rate of return, is correct
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