Question

which of the following is true? multiple choice question. firms should never give up a positive npv project to increase a dividend. firms should give up a positive npv project only in order to pay a dividend for the first time. firms should give up a positive npv project in order to increase a current dividend.

Answer 1

Firms should never give up a positive NPV project to increase a dividend.

Step-by-step explanation:

The correct answer is: Firms should never give up a positive NPV project to increase a dividend.

Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and outflows of a project, taking into consideration the time value of money. A positive NPV indicates that a project is expected to generate more cash inflows than outflows, resulting in a profit.

However, firms should never give up a positive NPV project to increase a dividend because doing so would mean sacrificing long-term profitability for short-term gains. Dividends are payments made to shareholders out of a firm's profits, and while they can be important for attracting and retaining investors, they should not be prioritized over value-creating projects.