A financial manager who does not follow the general constraints of the NPV rule may:
A) accept a negative NPV project for fear of losing an investment opportunity.
B) accept a marginally acceptable NPV project limiting the corporation's ability to choose a competing project.
C) not consider all options available in a capital budgeting decision.
D) not take a positive NPV project even if the NPV is adequate reward to forego the option.
E) All of

Question

Quizplus · Accepted Answer

All of the options listed represent situations in which a financial manager is not following the general constraints of the NPV rule. Choosing a negative NPV project or limiting the corporation's ability to choose a competing project can both lead to a decrease in overall profitability. Failing to consider all options available or passing up a positive NPV project can also be detrimental to the company's financial success. Therefore, any situation in which a financial manager does not follow the NPV rule is potentially harmful to the corporation.

A Financial Manager Who Does Not Follow the General Constraints