An analyst is preparing a capital project proposal. If the analyst suffers from overoptimism, proposal will tend to have which one of the following characteristics?

Question

Multiple Choice

A. Overestimated expenses

B. Underestimated profits

C. Overestimated construction costs

D. Underestimated sales estimates

E. Overestimated net present values

Answer 1

If an analyst suffers from overoptimism, the proposal will tend to have the characteristic of:

D. Underestimated sales estimates

Overoptimism typically leads to more favorable forecasts regarding sales, growth, and profits, while expenses and costs may be underestimated. As a result, the analyst might present overly optimistic sales projections.