A project assessment shows a positive NPV even after allowing for real option value. Which one of the following options best describes what action management should take?
A) Accept the project without further study
B) Reject the project and carry out further investigation of it
C) Reject the project
D) Accept the project and carry out further investigation

Question

Quizplus · Accepted Answer

The positive NPV indicating the project is profitable, and the presence of real options suggests even higher potential profitability. Therefore, it is prudent to investigate the project further to identify and quantify the real options and their potential impacts on the project's value. Accepting the project without further study may overlook these valuable options, while rejecting the project may lead to missing out on a profitable opportunity. Hence, accepting the project and carrying out further investigation appears to be the best choice.

A Project Assessment Shows a Positive NPV Even After Allowing