Question

Viewing capital budgeting decisions as a series of real options is useful to strategic analysis because ____

A) Contingent results may provide an option to bail out of a project with subsequent poor outcomes

B) The true value of a project should be considered as the NPV plus the value of the option

C) Strong markets and subsequent expansion options cannot be ignored when the firm thinks about undertaking a project

D) All of the above

Answer 1

The Correct option is all of the above

Capital Budgeting refers to the different techniques which are used to analyse the different outcomes of the project and analyse them in different ways. It helps the company to Neglect or bail out the project with poor profitability and also Net present value helps to determine the present value of the project according to a given level of risk or cost of capital.

This also helps the firm to grow overall or bring competence in the market.