Assume You Are an Overconfident Manager

question 35

Multiple Choice

Assume you are an overconfident manager. You are most apt to do which one of the following more so than you would if you were not overconfident?

• A) Research a project more thoroughly before committing funds to commence it
• B) Accept risky projects that turn out to be less profitable than you expected
• C) Wait until new technology proves its worth before incorporating it into your firm's operations
• D) Avoid mergers and acquisitions
• E) Invest excess company cash more conservatively than your peers at other firms

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Definitions:

Tax Benefit

A reduction in tax liability offered by the government for specific expenses, investments, or other financial decisions, leading to a decrease in the total taxes paid.

Debt-Equity Ratio

A metric for evaluating a firm's financial leverage, determined by dividing its total debts by the equity held by shareholders.

Cost of Debt

The actual rate a firm incurs on its overall debt, representing the cost of acquiring funds.

Equity Risk

The risk of loss associated with fluctuations in the price of equities or stocks.