Book Edition | 15th Edition |
Author(s) | Brigham |
ISBN | 9781337395250 |
Publisher | Cengage Learning |
Subject | Finance |
Growth or expansion means additional cash flows.
Growth or expansion options are add-ons to successful investments. They won't be made unless early success justifies them and they will, by definition, add positive NPV to the original project analysis. Therefore, not including them would make the project underestimate total potential NPV.
If a company does not consider growth options, it would underestimate project NPVs.