Lighthouse Corporation Uses the NPV Method for Selecting Projects,and It

question 13

Multiple Choice

Lighthouse Corporation uses the NPV method for selecting projects,and it does a reasonably good job of estimating projects' sales and costs.However,it never considers real options that might be associated with projects.Which of the following statements is most likely to describe its situation?

• A)Its estimated capital budget is probably too small, because projects' NPVs are often larger when real options are taken into account.
• B)Its estimated capital budget is probably too large due to its failure to consider abandonment and growth options.
• C)Failing to consider abandonment and flexibility options probably makes the optimal capital budget too large, but failing to consider growth and timing options probably makes the optimal capital budget too small, so it is unclear what impact not considering real options has on the overall capital budget.
• D)Failing to consider abandonment and flexibility options probably makes the optimal capital budget too small, but failing to consider growth and timing options probably makes the optimal capital budget too large, so it is unclear what impact not considering real options has on the overall capital budget.

---

Definitions:

Posture

The position in which someone holds their body when standing or sitting, which can impact physical health and perceived confidence.

Hearing Loss

Hearing loss is a partial or total inability to hear, which can affect one or both ears and range from mild to profound severity.

Americans

Refers to individuals originating from or citizens of the United States of America.

Sensory Organ

A part of the body that responds to specific stimuli by sending signals to the brain, including organs like eyes, ears, and skin.