Which of the Following Is a Valid Reason for Managers

question 92

Multiple Choice

Which of the following is a valid reason for managers selecting projects with negative NPV?

• A) The NPV analysis includes a valuable real option to expand the project if things go well.
• B) If a firm has debt, managers may create value for shareholders by taking on some risky negative NPV projects.
• C) Managers' payoff functions represent the payoffs of lenders. By taking negative NPV projects, the managers can create value for lenders.
• D) Projects having negative NPV can have high internal rate of return.

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Definitions:

Canadian Institutes of Health Research (CIHR)

Canada's federal funding agency for health research, supporting the creation of new knowledge and its application to improve health, health care, and economic outcomes.

Organisation for Economic Co-operation and Development

An international organization that works to build better policies for better lives, focusing on economic progress and world trade.

Integrated Management Program

A coordinated approach to planning, executing, and evaluating projects or operations across multiple sectors or disciplines.

Environmentally-friendly

Practices or products that have minimal impact on the environment and contribute to ecological balance.