Project a Has a Positive NPV

question 37

Multiple Choice

Project A has a positive NPV.What should the investment manager do in this situation?

• A)Accept the project.
• B)Reject the project.
• C)Be indifferent between accepting or rejecting the project.
• D)Not make any decision as there is insufficient information to decide if the project will be beneficial to the shareholders.

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Definitions:

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership such as options.

Floatation Costs

The expenses incurred by a company when issuing new securities, including underwriting fees, legal fees, and registration fees.

Firm Commitment

A type of underwriting where an underwriter agrees to buy all the unsold shares in an offering and sell them to the public.

Underwriter

An underwriter is a person or entity that assesses and accepts the risk of another party, often in financial transactions or insurance, determining the terms of coverage or investment suitability.