Discuss how real option thinking can promote building costly

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Answer the following discussion questions. Two well developed paragraphs for each question. Keep each question separate.

1."Capital budgeting implies that a company does not have unlimited funding capacities and that it is necessary to make a choices. The cost of capital also called "weighted average cost of capital" or WACC is definitely a means of budgeting. Discuss how the cost of capital and capital rationing are used in the capital budgeting process.

2."Real options include using decision trees and conditional probabilities. Discuss how real option thinking can promote building costly yet inefficient plants that become profitable." Discuss

Reference no: EM13814969

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