Concept explainers
Real option: A real option is choice available with business investment opportunity. It is the alternative to taken by business either to exercise the option available to the business investment or reject the proposal regarding new investment. The business may have to take various decisions regarding expansion of business, divestment, and liquidation. Real option includes expansion of business, deferring staging and many other choices. Real options have the opportunities to expand or curtail project.
To determine:
The kind of option that will be provided to the company if it can sell the XC-750 to another firm for $2 million in two years.
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Fundamentals of Corporate Finance, Student Value Edition Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition)
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