The option to alter production technology:
A) has no value once a project has been implemented.
B) lowers a project's NPV due to the increased uncertainty.
C) provides managers with valuable flexibility.
D)should be ignored when analyzing a project because of its uncertainty.

Question

Quizplus · Accepted Answer

The option to alter production technology provides managers with valuable flexibility to adapt to changing market conditions or technological advancements, which can ultimately increase a project's NPV. While there may be some uncertainty associated with technological changes, this uncertainty can be mitigated through careful planning and analysis. Therefore, the option to alter production technology should not be ignored and can be a valuable asset to a project.

The Option to Alter Production Technology