When managers cannot determine whether to invest now or wait until costs decrease later,the rule should be to:
A) postpone until costs reach their lowest level.
B) invest now to maximize the NPV.
C) postpone until the opportunity cost reaches its lowest level.
D) invest at the date that provides the highest NPV today.

Question

Quizplus · Accepted Answer

The best approach when managers cannot determine whether to invest now or wait until costs decrease later is to invest at the date that provides the highest NPV today. This is because the NPV calculation takes into account the time value of money and discounts future cash flows back to their present value. Therefore, if the investment has a positive NPV today, it is better to invest now rather than waiting for costs to decrease in the future as the investment will generate more value for the company today than it would in the future.

When Managers Cannot Determine Whether to Invest Now or Wait