Whether to Invest in a Project Today or to Postpone

question 1

Multiple Choice

Whether to invest in a project today or to postpone the decision until next year is a decision facing the CEO of the Aaron Co. The project has a positive expected NPV, but its cash flows could be less than expected, in which case the NPV could be negative. No competitors are likely to invest in a similar project if Aaron decides to wait. Which of the following statements best describes the issues that Aaron faces when considering this investment timing option?

• A) the more uncertainty about the future cash flows, the more logical it is for aaron to go ahead with this project today.
• B) since the project has a positive expected npv today, this means that its expected npv will be even higher if it chooses to wait a year.
• C) since the project has a positive expected npv today, this means that it should be accepted in order to lock in that npv.
• D) waiting would probably reduce the project's risk.
• E) the investment timing option does not affect the cash flows and will therefore have no impact on the project's risk.

---

Definitions:

Global Markets

The international trading system that enables the exchange of goods, services, and currencies across borders.

Transform Cultures

The process of making significant and fundamental changes to the shared values, beliefs, norms, and practices within an organization to achieve desired outcomes.

Domestic Corporations

Companies that are incorporated in, and operate primarily within, the country they are registered.

World's Economy

Describes the global network of economic activities, including production, consumption, and trade of goods and services across different countries.