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 over-optimism?
A) Overestimated construction costs.
B) Overestimated expenses.
C) Overestimated net present values.
D) Underestimated profits.
E) Underestimated sales estimates.

Question

Quizplus · Accepted Answer

Over-optimism in financial projections typically leads to overestimating the benefits of a project, such as its net present value, due to overly positive assumptions about future outcomes.