You Are Given a Job to Make a Decision on Project

question 3

Multiple Choice

You are given a job to make a decision on project X, which is composed of three independent projects A, B, and C which have NPVs of + $70, -$40 and + $100, respectively. How would you go about making the decision about whether to accept or reject the project?

• A) Accept the firm's joint project as it has a positive NPV
• B) Reject the joint project
• C) Break up the project into its components: accept A and C and reject B
• D) None of the above

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Definitions:

Market Maker

A firm or individual who actively quotes two-sided markets, providing bids and offers along with the market size of each.

Profit Maximizing

The process of making business decisions that result in the highest possible profit, by adjusting production levels, prices, and other variables.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in market balance.

Profit

The financial gain that results when the revenues generated from business activities exceed the expenses, taxes, and costs incurred.