If a Firm Has Achieved Its Target Cash Balance the Net

question 12

Multiple Choice

If a firm has achieved its target cash balance the net present value is:

• A) positive because the cash balance is positive.
• B) zero because increasing the cash balance increases the interest cost.
• C) negative because the cash balance has a financing cost.
• D) positive because decreasing the cash decreases the cost of illiquidity.
• E) None of these.

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Definitions:

Confusion

A state of being bewildered or unclear in one’s mind about something.

DSM-5

A complete classification system for mental disorders, the Fifth Edition of the Diagnostic and Statistical Manual of Mental Disorders is employed by medical professionals.

Withdrawal

Unpleasant, sometimes dangerous reactions that may occur when people who use a drug regularly stop taking or reduce their dosage of the drug.

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The adjustment that the brain and the body make to the regular use of certain drugs so that ever larger doses are needed to achieve the earlier effects.