If an Additional Dollar Spent on Monitoring Would Reduce Shirking

question 31

Multiple Choice

If an additional dollar spent on monitoring would reduce shirking by 10 minutes,then the firm will increase the worker's wage by $1 if this caused

• A) shirking to increase by less than 10 minutes.
• B) shirking to decrease by more than 10 minutes.
• C) shirking to decrease by less than 10 minutes.
• D) monitoring to become unnecessary.

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Definitions:

IRR

Internal Rate of Return; the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.

Capital Rationing

In capital budgeting, the process of allocating available capital among projects to maximize total NPV.

IRR

The Internal Rate of Return; a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.