Financing decisions differ from investment decisions for which of the following reasons? I) You cannot use NPV to evaluate financing decisions
II) The market for financial assets is more active
III) It is easier to find financing decisions with positive NPV than to find investment decisions with positive NPV
A) I only
B) II only
C) III only
D) I and III only

Question

Quizplus · Accepted Answer

The statement that the market for financial assets is more active is a reason why financing decisions differ from investment decisions, as it is relevant to the process of making financing decisions. The statement that it is easier to find financing decisions with positive NPV than to find investment decisions with positive NPV is not necessarily true, as the availability of financing and the cost of that financing can impact the NPV of a financing decision. Additionally, it is possible to use methods such as cost of capital or WACC to evaluate financing decisions. The statement that you cannot use NPV to evaluate financing decisions is false.

Financing Decisions Differ from Investment Decisions for Which of the Following