When managers use NPV analysis, agency costs are eliminated, and governance is not needed to monitor MNC decisions regarding projects.

Question

Quizplus · Accepted Answer

While NPV analysis does take into consideration the costs and benefits of a project, it does not completely eliminate agency costs or the need for governance. MNC managers may still have their own interests and objectives that conflict with those of the company, and governance mechanisms such as board oversight and executive compensation may be necessary to ensure that decisions are in the best interest of the firm as a whole.

When Managers Use NPV Analysis, Agency Costs Are Eliminated, and Governance