The Shareholders of a Firm Will Benefit the Most from a Positive

question 52

Multiple Choice

The shareholders of a firm will benefit the most from a positive net present value project when the delta of the call option on the firm's assets is:

• A) equal to one.
• B) between zero and one.
• C) equal to zero.
• D) between zero and minus one.
• E) equal to minus one.

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Definitions:

Positive Externality

A beneficial effect experienced by a third party due to an economic activity, without compensation.

Socially Optimal

Refers to a state or condition in which resources are allocated in the most efficient manner from the perspective of society as a whole, maximizing overall well-being.

Market Quantity

Refers to the total amount of a particular good or service that is available for purchase in a market at a specific point in time.

Technology Spillover

An external benefit that results when knowledge spreads among individuals and firms.