Suppose a company uses the NPV method, along with risk adjusted WACCs, to calculate project NPVs However, it has not been considering real options in its capital budgeting decisions Now suppose the company changes its capital budgeting process to take account of four types of real options timing, f...

In general each of these options would increase the expected NPV and reduce the standard de ...

Suppose a company uses the NPV method, along with risk-adjusted WACCs, to calculate project NPVs. However, it

Question:

Suppose a company uses the NPV method, along with risk-adjusted WACCs, to calculate project NPVs. However, it has not been considering real options in its decisions. Now suppose the company changes its process to take account of four types of real options-timing, flexibility, growth, and abandonment. Would this decision be likely to affect some of the calculated NPVs? Explain your answer.

Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...