Traditionally,an NPV analysis assumes that projects will be accepted or rejected,which implies that they will be undertaken now or never.However,in practice,companies sometimes have a third choice--delay the decision until later,when more information will be available.Because the analysis extends out at least one additional year from the original analysis,it is unlikely that the firm would ever delay a project--particularly given the loss of the "first mover advantage."

Question

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Delaying a project can be a strategic decision, allowing a firm to gather more information and reduce uncertainty, which can sometimes outweigh the benefits of immediate action and the potential loss of a "first mover advantage."

Traditionally,an NPV Analysis Assumes That Projects Will Be Accepted or Rejected,which