Which of the following reasons is NOT a valid explanation of why managers sometimes choose to take on negative-NPV Projects?
A) The NPV analysis does not include a valuable real option to expand the project if things go well.
B) If the company has debt, managers may create value for shareholders by taking on some risky negative-NPV projects.
C) Managers' pay-off functions represent the pay-offs of lenders. By taking negative-NPV projects, the managers can create value for lenders.
D) All of the above descriptions are valid explanations for why managers sometimes take on negative NPV projects.
Correct Answer:
Verified
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