Which of the following best defines 'incremental earnings'?
A)The net present value (NPV)of earnings that a firm is expected to receive as the result of an investment decision
B)The amount by which a firm's earnings are expected to change as the result of an investment decision
C)Cash flows arising from a particular investment decision
D)The earnings arising from all projects that a company plans to undertake in a fixed timespan

Question

Quizplus · Accepted Answer

Incremental earnings refer to the additional earnings that a firm is expected to make as a result of a particular investment decision. It is the difference between the earnings that the firm is expected to generate with the new investment and the earnings that it would have generated without the investment. Therefore, option B is the best choice. Option A refers to the net present value of earnings, while option C refers to cash flows, and option D refers to all projects a firm plans to undertake, which may not be relevant to the specific investment decision at hand.

Which of the Following Best Defines 'Incremental Earnings