Final answer:
Net Present Value (NPV) analysis is a fundamental economic principle used to evaluate the profitability of investment projects. Option D is correct because NPV analysis can lead to catastrophic mistakes when it is used for projects whose NPV including options value is more than NPV excluding options value.
Step-by-step explanation:
Net Present Value (NPV) analysis is a fundamental economic principle used to evaluate the profitability of investment projects. It compares the present value of future cash flows to the initial cost of the investment, taking into account the time value of money.
Option A is incorrect because positive NPV IT projects do not necessarily lead to deadly overspending. Option B is incorrect because NPV analysis does not lead to catastrophic mistakes in terms of missed strategic opportunities based on the values of NPV. Option C is incorrect because NPV analysis is not foolproof and its accuracy depends on the assumptions and inputs used.
Option D is correct. NPV analysis can lead to catastrophic mistakes in terms of missed strategic opportunities when it is used for projects whose NPV including options value is more than NPV excluding options value. This means that when considering the value of options in future cash flows, the analysis may overlook potentially valuable opportunities.