What are the shortcomings of option pricing methods for valuing real assets?

de whether to begin production today or in one year. The following facts apply:
Initial investment ; rises by 10% each year Price of beer in 1 year or D75 with equal probability Variable production cost per bottle Fixed production cost per year Expected production bottles per year forever Discount rate

a. Draw a decision tree that depicts Grolsch's investment decision.

b. Calculate the NPV of investing as if it were a now-or-never alternative.

c. Calculate the NPV (at ) of waiting one year before deciding.

d. Calculate the NPV of investing today, including all opportunity costs.

e. Should Grolsch invest today or wait one year before making a decision?