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You are the CEO of Solar-Tech Solutions Inc., and have just been awarded a large number of executive stock options. The company has two mutually exclusive projects available. The first project has a large NPV and will reduce the total risk of the company. The second project has a small NPV and will increase the total risk of the company. Your first thought is to accept the first project when you remember your executive stock options. How might this affect your final decision? [NOTE: Accepting the second project, which will increase the overall risk of the company and reduce the value of the firm’s debt. On the other hand, accepting the risky project will increase your wealth, as the options are more valuable when the risk of the firm increases.]

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Financial Management, Finance

Category:- Financial Management
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