The problem of 'underinvestment' arises when managers are reluctant to undertaken projects with positive net present value because:
A) managers prefer less risk than do lenders.
B) the projects lead to increased funds available to lenders.
C) it would adversely affect managers' bonus payments.
D) managers prefer to maintain a greater level of funds within the entity.

Question

Quizplus · Accepted Answer

The Answer of The problem of 'underinvestment' arises when managers are reluctant to undertaken projects with positive net present value because:
A) managers prefer less risk than do lenders.
B) the projects lead to increased funds available to lenders.
C) it would adversely affect managers' bonus payments.
D) managers prefer to maintain a greater level of funds within the entity.

The Problem of 'Underinvestment' Arises When Managers Are Reluctant to Undertaken