You Are a Manager Considering a Positive-NPV Project

question 70

Multiple Choice

You are a manager considering a positive-NPV project. Which of the following announcements indicate that you may have underestimated its NPV?

• A)Two critical industry suppliers announce that they will merge their firms.
• B)A key competitor releases earnings results, and its stock price drops by 25 percent in response.
• C)You just found out that the project's chief engineer has recently received multiple job offers from competing firms.
• D)Your marketing staff alerts you that the new project may "cannibalize" sales (i.e., reduce sales)of existing product to a greater extent.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the business cycle, whichever is longer.

Current Assets

Short-term assets that are expected to be converted into cash, sold, or consumed within one year or within the business's operating cycle, whichever is longer.

Operating Cycle

The average period of time between the purchase of goods or services and the receipt of cash from sales, typical in the context of a company's day-to-day operations.