A manager is deciding whether to take on a project this fiscal year or wait for a few years before committing.What method should the manager use to make this decision?

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Real option valuation allows managers to analyze the value of waiting to invest in a project. It takes into account the flexibility to delay, expand, or abandon the project in the future. This method is particularly useful when there is uncertainty about future market conditions or technological advancements. Break-even analysis, scenario analysis, and sensitivity analysis are useful in evaluating the feasibility of a project but do not address the option of waiting.

A Manager Is Deciding Whether to Take on a Project