Assume a project currently has a negative net present value.Which one of these expectations would indicate that the timing option for that project may have a positive value?

Question

Quizplus · Accepted Answer

The timing option for a project relates to the ability to delay a project's start or to accelerate its completion. If the contribution margin for the project is expected to improve next year, it may indicate that it is valuable to delay the project's start so that the improved contribution margin can be realized. This delay option may result in an increase in the project's net present value, even if it is currently negative. Therefore, choice E indicates a positive value for the timing option of the project.

Assume a Project Currently Has a Negative Net Present Value