The value additivity principle indicates that, when a firm undertakes an independent project, the value of the firm is increased by the ____ from the project.
A) present value of the cash inflows
B) sum of the cash inflows and outflows
C) net present value
D) none of the above

Question

Quizplus · Accepted Answer

The value additivity principle states that the value of a firm increases by the net present value (NPV) of an independent project. NPV accounts for both inflows and outflows, providing a measure of the project's contribution to the firm's value.

The Value Additivity Principle Indicates That, When a Firm Undertakes