Now Assume That 1 Year from Now OI Will Know

question 14

Multiple Choice

Now assume that 1 year from now OI will know if the F-100 has become the industry standard. Also assume that after receiving the cash flows at t = 1, OI has the option to abandon the project, in which case it will receive an additional $100,000 at t = 1 but no cash flows after t = 1. Assuming that the cost of capital remains at 12%, what is the estimated value of the abandonment option?

• A) $2,075
• B) $4,067
• C) $8,945
• D) $10,745

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Definitions:

Suicide Rate

The number of suicides occurring within a defined population, area, or group within a specific time period, typically per 100,000 individuals per year.

Native Americans

Indigenous peoples of the United States, including their cultures, histories, and present-day communities.

National Average

A statistical measure that represents the central or typical value in a set of data distributed across a nation, used in various contexts like income, test scores, or health indicators.

Suicide Gesture

Motivated by a need for aid and support from others. The intent for a completed suicide is not present, yet the individual wants to draw attention through a “call for help.” Sometimes the gesture turns out to be a completed suicide, yet these are difficult to prove or disprove.