Marzella Corp. is analyzing a project that involves expanding the firm into a new product line. The project's financial projections will tend to have which one of the following characteristics if the person compiling those projections suffers from overoptimism?
A) Overestimated construction costs
B) Overestimated expenses
C) Overestimated net present values
D) Underestimated profits
E) Underestimated sales estimates

Question

Quizplus · Accepted Answer

Overoptimism in financial projections typically leads to overestimating the positive aspects of a project, such as its net present values, by assuming more favorable outcomes than might realistically occur.