Final answer:
A firm with $100 million in excess cash can invest in projects with positive NPVs, pay dividends to shareholders, or acquire another firm. Each option has different strategic implications and potential returns, which the firm must carefully consider.
Step-by-step explanation:
If a firm has $100 million in excess cash, it has multiple options concerning the allocation of these funds for future profit. The firm could invest the funds in projects with positive NPVs (Net Present Values), indicating that the projects are expected to generate profits over time that exceed the initial investment amount. Alternatively, the firm could choose to pay high dividends to the shareholders, distributing the excess cash amongst its owners as a reward for their investment. The firm also has the option to acquire another firm, which might offer strategic advantages or immediate access to new markets, products, or technologies. Ultimately, the decision depends on the firm's strategic goals, market conditions, and the potential return on investment for each option.