Beyond some point, a further increase in the size of the firm's total capital budget may lead to a decrease in the
NPVs of all the investments being considered.

Question

Quizplus · Accepted Answer

This is due to the diminishing returns of a firm's capital, where eventually the cost of capital and the complexity of managing a larger portfolio of investments may outweigh the potential benefits of additional investments.

Beyond Some Point, a Further Increase in the Size of the Firm's