Subject category:
Finance, Accounting and Control
Published by:
Darden Business Publishing
Version: 4 January 2022
Revision date: 17-Jan-2022
Length: 6 pages
Data source: Published sources
Abstract
The B case extends the analysis in the A case to the next level, where the executive must choose between two mutually exclusive plant-renovation projects. Net present value (NPV) and internal rate of return rank the projects differently, affording an opportunity to (IRR) discuss the classic crossover problem in capital investment analysis. Operational flexibility is a significant factor, permitting a discussion of the role of real options in investment analysis. The last element is politics as managers jockey for project approval.
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Abstract
The B case extends the analysis in the A case to the next level, where the executive must choose between two mutually exclusive plant-renovation projects. Net present value (NPV) and internal rate of return rank the projects differently, affording an opportunity to (IRR) discuss the classic crossover problem in capital investment analysis. Operational flexibility is a significant factor, permitting a discussion of the role of real options in investment analysis. The last element is politics as managers jockey for project approval.