A Firm Has a Tract of Timber

question 89

Multiple Choice

A firm has a tract of timber.The future growth rate of the trees and the price of lumber are uncertain.The firm:

• A) has an expansion option.
• B) has an option to vary the production technology.
• C) should harvest the timber immediately if NPV is positive.
• D) has a timing option.

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Definitions:

Stockholder Wealth

The total value of an individual's or entity's ownership stake in a corporation, measured by the market value of the shares held.

Stock Dividend

A form of dividend payment made in additional shares of the issuing corporation, rather than in cash.

Reverse Stock Split

A corporate action that consolidates the number of existing shares of stock into fewer, proportionally more valuable shares.

Shares

Units of ownership interest in a corporation or financial asset, providing a proportionate claim on its assets and profits.