If a Firm Has Achieved Its Target Cash Balance the Net

question 34

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.

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Definitions:

Medical Savings Accounts

Special savings accounts for medical expenses that provide tax advantages for individuals.

Tax Treatment

Tax treatment describes the specific ways in which particular financial transactions or investments are taxed, including deductions, exemptions, and rates applied.

Medical Savings Accounts

Special savings accounts designed to help individuals save for future medical expenses, offering tax advantages to encourage their use.

Economic Efficiency

A situation in which all of the potential gains from trade have been realized. An action is efficient only if it creates more benefit than cost. With well-defined property rights and competition, market equilibrium is efficient.