When a manager does not accept a positive NPV project,shareholders face an opportunity cost in the amount of the:
A) project's initial cost.
B) project's NPV.
C) project's discounted cash flows.
D)soft capital rationing budget.

Question

Quizplus · Accepted Answer

The NPV (net present value) of a project represents the difference between the present value of its future cash inflows and the present value of its initial cost. A positive NPV indicates that the project generates value for the shareholders, as it yields a return that is higher than the required rate of return. Therefore, if a manager does not accept a positive NPV project, the shareholders face an opportunity cost equal to the amount of the project's NPV, as they are missing out on the potential value the project could create for them.

When a Manager Does Not Accept a Positive NPV Project,shareholders