Conventional capital budgeting analysis will tend to understate the true NPV of a project if any of the following are present EXCEPT:
A) Contingency plan options.
B) The option to default.
C) The option to expand.
D) The option to abandon.
E) The option to wait.

Question

Quizplus · Accepted Answer

The option to default is not typically considered a positive or value-adding option in conventional capital budgeting analysis. It represents a failure to meet obligations, which is not a strategic option like the others (expansion, abandonment, waiting, or contingency plans) that can add value to a project by providing flexibility or additional opportunities.

Conventional Capital Budgeting Analysis Will Tend to Understate the True