Finance & Investment - Essay Example

A firm in an oligopoly can accept such a project to increase market share and further increase the barrier of entries into the market (Colander, 2004). The company may see hidden potential in such a project and it may have a method or plan in how to turn things around. Another possibility is that the project includes key assets which are scarce and owning them provides the company with a competitive advantage in the long-run. A company may lead a land property empty even though the present value of the rents it would receive by constructing the retail complex exceeds the construction cost for different reasons.

The company may be diversified firm with a variety of business alternatives other than the construction of a mall for the piece of land. A smart manager with alternatives would have compared project A with the two or three other potential alternatives for the land. Project A may have a positive NPV, but if any of the other projects had a higher overall total NPV than the retail complex project then the other project was selected instead of the retail complex project. Another possibility is that the land is located in booming real estate region.

The land may be appreciating at a high yearly rate. If this is the case the owner of the land may be better off not using the land and selling at a future date when the value of the investment could be worth twice what it is today. Koshima’s development of its first laptop computer at a loss is an event that could have been forecasted by the executives of the company and even if it occur and the executive knew it would it does not imply the project has an absolute bust. If the company did not have any experience manufacturing laptops, then this means they had to go through the process of a learning curve to achieve efficiency in the manufacturing production line.

When the first laptop came out the learning curve had not gone into effect yet. The creation of new product requires extensive capital investment;