A retail company is considering an expansion project with a NPV of -R10 million. The project entails
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Question:
A retail company is considering an expansion project with a NPV of -R10 million. The project entails building a warehouse with cutting edge inventory tracking and binning capabilities. The management team also identified a strategic option of running an e-commerce site, which would only be possible if the warehouse is built, in the near future. This strategic option has a NPV of R15 million associated with it. What would the Real NPV of the project be; and should the company accept the project given this real option?
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