FIN 486 Expect Success/uophelp.com FIN 486 Expect Success/uophelp.com | Page 40

forecast revenues to develop more slowly than planned. Such a delay
in implementation at that point has a NPV of $10,000.
Jenny estimated that there was a 25% chance that the abandonment
option would need to be exercised, a 30% chance that the expansion
option would be exercises, and only a 10% chance that the
implementation of certain phases of the project would have to be
delayed.
a) use the information provided to calculate the strategic NPV, NPV
strategic , for Asor Products' proposed equipment expenditure.
b) judging on the basis of the findings in part a, what action should
jenny recommend to management with regard to the proposed
equipment expenditure?
c) In general, how does this problem demonstrate the importance of
considering real options when making capital budgeting decisions?
=========================================
===

FIN 486 Week 5 Team Assignment Case Study Casa de
Diseno

For more course tutorials visit
www.uophelp.com

Chapter 16
Case Study: Casa de Diseno
In January 2012, Teresa Leal was named treasurer of Casa de Diseno.
She decided that she could best orient herself by systematically
examining each area of the company’s financial operations. She