What are the implications for a firm that selects the wrong project?

Expert Solution

Implication for a firm that will be selecting the the wrong project would be as follows-

A. It would be leading to negative implications for the bottom line of the company because of negative outcome of the project.

B. It would also be leading into negative outcome for the project in the form of negative net present value and negative profitability index.

C. it can also be hampering the further future growth prospects of the company

D.it would be leading to decrease into the share price of the company because of inability to report profit and market will be highly futuristic in discounting that.

E. It would also lead to liquidity problem for the company because it would not be able to finance its debt, if the project was undertaken on the basis of the project financing.

F. It would also lead to solvency crisis of the company because it would be meaning that company is not able to repay its debt in the longer period of time

G. It will also mean that there would be lesser motivation the part of the employees because they are not able to perform.

jeff jeffy answered 2 years ago

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