Commodore Corporation Is Deciding Whether to Invest in a Project

question 17

Multiple Choice

Commodore Corporation is deciding whether to invest in a project today or to postpone the decision until next year.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 Commodore decides to wait.Which of the following issues should Commodore consider most seriously when making this investment decision?

• A)The more uncertainty about the future cash flows, the more logical it is for Commodore 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.

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