Two or More Investment Opportunities Score the Same ENPV

question 26

Multiple Choice

Two or more investment opportunities score the same ENPV. What should the company do with respect to the projected cash flows on which the analysis is based?

• A) Not consider the cash flows as risk has already been factored in the analysis and will be double counted.
• B) Consider the cash flows on which ENPV was created as the option with the largest cash flow is the appropriate choice.
• C) Always delay the project until more information resolves the tie.
• D) Consider the cash flows as risk-adverse investors will choose the project with the lowest potential loss.
• E) Not consider the cash flows and select the project on qualitative features alone.

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Definitions:

Social Contract Theory

A philosophical theory which posits that individuals consent, either explicitly or tacitly, to surrender some of their freedoms and submit to an authority in exchange for protection of their remaining rights.

Fiduciary Responsibilities

Obligations of an individual or entity to act in the best interest of another party, especially when managing their assets.

Social Egalitarian

A belief in equal rights, duties, and opportunities for all individuals in a society, regardless of their background or economic status.

Wealth Earned

Financial gains obtained through work, investment, or other means of income generation.