Recognizing That It May Be in Managers' Best Interests to Be

question 25

Multiple Choice

Recognizing that it may be in managers' best interests to be overly optimistic when proposing projects,how might firms effectively control this impulse?

• A) Employ capital rationing
• B) Require that all proposals be initiated from the lowest possible management level
• C) Fire managers if any of their proposals fail to produce the expected results
• D) Fund all project proposals

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Definitions:

Trade-in Allowance

The discounted price offered when a customer gives a used item as part of the payment for a new item, reducing the cash cost of the new purchase.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the company's worth.

Gain

A financial increase or profit, particularly from the sale of investments or assets, not typically related to the entity’s primary operations.

Extraordinary Repair

A significant restoration or overhaul that extends an asset's useful life beyond its original forecast.