Investing in a negative NPV project today may be a feasible choice if:
A)the project has future option alternatives.
B)all the project's future options were included in the NPV analysis.
C)the current discount rate is low.
D)all the project's future options will be ignored by decision makers.
E)the discount rate is expected to increase over time.

Question

Quizplus · Accepted Answer

Investing in a negative NPV project today may still be a feasible choice if the project has future option alternatives. This means that even though the project has a negative NPV today, it may have potential future opportunities that could make the investment profitable in the long run. However, if all of the project's future options were already included in the NPV analysis and decision makers choose to ignore them, then investing in the negative NPV project may not be feasible. Additionally, if the current discount rate is low or expected to increase over time, it may further impact the feasibility of the investment.

Investing in a Negative NPV Project Today May Be a Feasible