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(Real options) Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi Gulf Coast in 2005. Notably, the burgeoning casino gambling industry along the Mississippi coast was virtually wiped out overnight. CGC Corporation owns one of the oldest casinos in the Biloxi, Missouri, area, and its casino was damaged but not destroyed by the tidal surge from the storm. However, since the competitor casinos were completely destroyed and will have to be rebuilt from scratch, CGC is considering the possibility of engaging in a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. Alternatively, CGC's owners are considering a relatively modest renovation of the property and building a newer casino in Gulf Shores, Alabama, which was also devastated by the storm. Of course, CGC could just shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. Identify the real options inherent in the situation faced by CGC. The options presented to CGC are the following: (Select all that apply.) A. Do nothing. B. Shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. C. Engage in a relatively modest renovation of the property. D. Shut down the operations of the casino entirely. E. Undertake a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. F. Invest in a newer casino in Gulf Shores, AL.

(Real options) Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi Gulf Coast in 2005. Notably, the burgeoning casino gambling industry along the Mississippi coast was virtually wiped out overnight. CGC Corporation owns one of the oldest casinos in the Biloxi, Missouri, area, and its casino was damaged but not destroyed by the tidal surge from the storm. However, since the competitor casinos were completely destroyed and will have to be rebuilt from scratch, CGC is considering the possibility of engaging in a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. Alternatively, CGC's owners are considering a relatively modest renovation of the property and building a newer casino in Gulf Shores, Alabama, which was also devastated by the storm. Of course, CGC could just shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. Identify the real options inherent in the situation faced by CGC. The options presented to CGC are the following: (Select all that apply.) A. Do nothing. B. Shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. C. Engage in a relatively modest renovation of the property. D. Shut down the operations of the casino entirely. E. Undertake a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. F. Invest in a newer casino in Gulf Shores, AL.

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter7: Economies Of Scale And Scope
Section: Chapter Questions
Problem 7.2IP
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(Real options) Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi Gulf Coast in 2005. Notably, the burgeoning casino gambling industry along the Mississippi coast was virtually wiped out overnight. CGC Corporation owns one of the oldest casinos in the Biloxi, Missouri, area, and its casino was damaged but not destroyed by the tidal surge from the storm. However, since the competitor casinos were completely destroyed and will have to be rebuilt from scratch, CGC is considering the possibility of engaging in a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. Alternatively, CGC's owners are considering a relatively modest renovation of the property and building a newer casino in Gulf Shores, Alabama, which was also devastated by the storm. Of course, CGC could just shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. Identify the real options inherent in the situation faced by CGC. The options presented to CGC are the following: (Select all that apply.) A. Do nothing. B. Shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. C. Engage in a relatively modest renovation of the property. D. Shut down the operations of the casino entirely. E. Undertake a major renovation of the casino to transform it from second-tier operation into one of the top gambling operations in the area. F. Invest in a newer casino in Gulf Shores, AL.
Transcribed Image Text:(Real options) Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi Gulf Coast in 2005. Notably, the burgeoning casino gambling industry along the Mississippi coast was virtually wiped out overnight. CGC Corporation owns one of the oldest casinos in the Biloxi, Missouri, area, and its casino was damaged but not destroyed by the tidal surge from the storm. However, since the competitor casinos were completely destroyed and will have to be rebuilt from scratch, CGC is considering the possibility of engaging in a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. Alternatively, CGC's owners are considering a relatively modest renovation of the property and building a newer casino in Gulf Shores, Alabama, which was also devastated by the storm. Of course, CGC could just shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. Identify the real options inherent in the situation faced by CGC. The options presented to CGC are the following: (Select all that apply.) A. Do nothing. B. Shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. C. Engage in a relatively modest renovation of the property. D. Shut down the operations of the casino entirely. E. Undertake a major renovation of the casino to transform it from second-tier operation into one of the top gambling operations in the area. F. Invest in a newer casino in Gulf Shores, AL.
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