Corporate Managers Can Maximize Shareholder Wealth by Choosing Positive NPV

question 27

Multiple Choice

Corporate managers can maximize shareholder wealth by choosing positive NPV projects because:

• A) all investors have the same preferences.
• B) the unhappy shareholders can sell off shares.
• C) the separation theorem in financial markets states that all investors will be satisfied with the same investment decision regardless of personal preferences.
• D) managers are wiser than shareholders regarding investments.

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Definitions:

Operating Income

Earnings before interest and taxes, representing a company's profit from its core business operations.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected amount, multiplied by the standard cost per unit.

Data Collected

Information gathered for analysis or used to make decisions, often through observations, experiments, or measurements.

Variable Costs

Costs that vary directly with the level of production or output, such as materials and direct labor costs.