Marzella Corp.is analyzing a project that involves expanding the firm into a new product line.The project includes the construction of a new manufacturing facility and the creation of a new distribution system.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 underestimating costs and overestimating revenues, leading to an overly positive financial outlook.