Question
Which of the following statements accurately describes characteristics of an option to abandon a project? Group of answer choices (a) A company with this flexibility
Which of the following statements accurately describes characteristics of an option to abandon a project?
Group of answer choices
(a) A company with this flexibility has a short position in a call option (i.e., selling the call option).
(b) A project with a get-out clause that will be applied if things do not go as planned has this flexibility.
(c) All other things being equal, the value of this option will decrease as the present value of the expected cash flows from the abandonment increases.
(d) The option will be exercised if the present value of the expected project cash flows is greater than the promised price in the get-out clause included in the project.
(e) None of the other statements are correct.
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