C) an interest-free bond with the same value as the firm's assets. When weighing several positive NPV options, the ones with the higher discounted values should be accepted. A central issue for managers, however, is how to deal with uncertaintyi.e., the fact that expected cash flows are only a point estimate of a large number of possible realizations. C) owners of a call option on the firm. A positive NPV denotes a good recovery, and a negative NPV indicates a low return. A) No, the project has a negative NPV. When management is deciding which of the various divisional projects should be accepted, the managers should: The authors conclude that negative fundamental value (based on the market . The positive value of NPV is expected to If a company consistently undertakes negative NPV projects, they are destroying equity value since the capital used to fund the projects is more costly than the If it is less than the cost of capital, then you reject the project. Ideally, you always want a positive NPV number as that means whatever investment project you are undertaking will give you positive returns in the long run. 44. A) holding a call option on the firm's assets. Given the available information, the project has a positive NPV. jet2 passenger locator form spain why managers would accept negative npv projects. A) the premium of a put option on future organic projects. Select correct option: Because there is hidden value in each project Because there may be chance of rapid growth Because they have invested a lot All of the given options. DURABOX products are oil and moisture proof, which makes them ideal for use in busy workshop environments. why managers would accept negative npv projects RealEstates LLP is considering the construction of a new development of condominiums in downtown Austin, Texas. The design of the plant allows it to easily be converted to manufacture other types of large machinery. Consider an option that gives the owner the right to buy a stock for $20 only on the third Friday of May, next year. Uninformed managers may compare the NPV value to the cost of the project rather than to the benchmark value of zero.
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why managers would accept negative npv projects