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(Real options and capital budgeting) Go Power Batteries has developed a high-voltage nickel-metal hydride battery that can be used to power a hybrid automobile and
(Real options and capital budgeting) Go Power Batteries has developed a high-voltage nickel-metal hydride battery that can be used to power a hybrid automobile and it can sell the technology inmediately to Toyota for 511 2 million Alternatively, Go Power Batteries can invest $53.6 million in a plant and produce the batteries for itself and sell them Unfortunately, the present value of the cash flows from such a plant would only be $44.4 million, such that the plant has a negative expected NPV of -39 2 million. The problem. Go Power executives recognize is the small size of the market for a hybrid car today Under what assumptions might Go-Power Batteries decide not to sell the technology to Toyota and delay investment in the new plant? (Select all that apply) A. The option to delay must rest on the fact that no other company would undertake a project with a negative NPV B. As long as Go-Power Batteries had patent protection none of its competitors will develop a superior technology that makes the hydride battery obsolete C. The option to delay must rest on patent protection which would give Go-Power Batteries the right to develop the new technology over the life of the patent D. Even if Go-Power Batteries had patent protection a competitor may develop a superior technology that makes the hydride battery obsolete
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