In order to maximize firm value, management should invest in new assets when cash flows from the assets are discounted at the firm's [blank] and result in a positive NPV.

Question

Quizplus · Accepted Answer

The cost of capital represents the minimum return that investors require to invest in the firm. If the cash flows from new assets are discounted at the firm's cost of capital and result in a positive NPV, it means that the investment is generating returns above the minimum rate required by investors, which will increase firm value. Therefore, management should invest in new assets when the project generates positive NPV when discounted at the firm's cost of capital.

In Order to Maximize Firm Value, Management Should Invest in New