A start-up company is moving into its first offices and needs desks, chairs, filing cabinets, and other furniture. It can buy the furniture for $25,000 or rent it for $1,500 per month.

The founders are of course confident in their new venture, but nevertheless they rent.

Why? What’s the option?

PROBLEM SETS

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Visit us at www.mhhe.com/bma Chapter 22 Real Options 573 AppendixLO1