A major corporation is considering a capital budgeting project that involves the

Question

A major corporation is considering a capital budgeting project that involves the developement of a new technology. The controller estimates the net present value to be negative, yet argues the company should invest in the project. Which of the following statements is most correct?

a) Capital rationing may exist for one year

b) The controller should be fired for making such a poor decsion

c) The profitability index may be greater then one, giving an accept decision

d) The controller may be considering the option to expand or modify the project in the future

Explanation / Answer

d) The controller may be considering the option to expand or modify the project in the future

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