A Firm Should Accept Projects with Positive Net Present Values

question 37

Multiple Choice

A firm should accept projects with positive net present values primarily because those projects will

• A)produce cash inflows that exceed the cash outflows.
• B)return the firm's initial cash outlay within 1 year.
• C)create value for the firm's current stockholders.
• D)produce only positive cash flows after the initial investment period.
• E)increase the current liquidity of the firm.

---

Definitions:

Behavioral Economics

A field of economics that studies how psychological, cognitive, emotional, cultural, and social factors affect economic decisions of individuals and institutions.

Loss Aversion

A cognitive bias where individuals fear losses more than they value equivalent gains.

Company Retirement

Often related to the benefits or pension schemes planned for employees after they retire from a company, differing from mandatory retirement policies.

Savings Programs

Financial plans or accounts that encourage saving by offering interest or other benefits.