Commodore Corporation is deciding whether it makes sense to invest in a project today, or to postpone this decision for one year. Which of the following statements best describes the issues that the commodore faces when considering this investment timing option?
a. The investment timing option does not affect the expected cash flows and should therefore have no impact on the project's risk.
b. The more uncertainty about the project's future cash flows the more likely it is that the commodore will go ahead with the project today.
c. If the project has a positive NPV today, this means that its expected NPV will be even higher if it chooses to wait a year.
d. All the above statements are correct.
e. None of the above statements is correct.
Having the ability to wait and see reduces a project's risk. Therefore, statement a is false. The greater the uncertainty, the more ...
This solution explains the correct option in 92 words.