A capital investment project that generates new opportunities is more valuable than one that doesn’t. A flexible project, one that does not commit management to a fixed operating strategy is more valuable than an inflexible one. When a project is flexible or generates new opportunities for the company, it is said to contain real options.
In this assignment, you are to discuss the budgeting implications of different option strategies and the cost-benefit issues associated with such decisions.
Why might recognizing a real option raise but not lower a project’s net present value (NPV) as found in a traditional analysis?
Why do we tend to underestimate NPV when we ignore the option to abandon?
What do you suggest as a cost-effective approach to capital budgeting analysis when a project contains real options.
Write a one-page memo in which you explain the answers to any two of the three questions.
Employee theft is a major problem in the U.S. retail industry. Information obtained from SecurityInfoWatch reported that twenty three (23) major retailers alone apprehended over 1.1 million shoplifters and dishonest employees, and recovered more than $189 million from these thieves in 2012.
Watch J. Farrell’s video titled “Prevent Employee Theft in Your Business”:
Provide at least two (2) examples of internal controls that could be implemented to reduce theft in the U.S. retail industry.