CFA Practice Question

There are 151 practice questions for this study session.

CFA Practice Question

Which statements about the economic income are correct?

I. The present value of the company's economic income should be equal to the present value of the discounted cash flows in the basic capital budgeting approach.
II. The economic income each year is equal to the cash flow minus the economic depreciation.
III. Interest expenses must be ignored when computing the economic income.
Correct Answer: II and III

I is wrong. The value of a company is the present value of its future cash flows. Economic income is the cash flow minus economic depreciation. They are usually different.

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