Use the Information for the Question(s)below

question 31

Multiple Choice

Use the information for the question(s) below.
You own a small manufacturing plant that currently generates revenues of $2 million per year.Next year,based upon a decision on a long-term government contract,your revenues will either increase by 20% or decrease by 25%,with equal probability,and stay at that level as long as you operate the plant.Other costs run $1.6 million per year.You can sell the plant at any time to a large conglomerate for $5 million and your cost of capital is 10%.
-Given the embedded option to sell the plant,the value of your plant will be closest to:

• A)$5.0 million.
• B)$4.0 million.
• C)$6.5 million.
• D)$8.0 million.

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Definitions:

RUPA

The Revised Uniform Partnership Act, which is a modern guide for the governance of partnerships, aiming to harmonize and modernize partnership law.

Profits Earned

The monetary gains made by a business after accounting for all expenses, indicating the financial success of business operations.

Gross Negligence

A severe form of negligence that shows a blatant disregard or indifference to the duty of care owed to others.

Intentional Violation

A deliberate breach of a law or regulation, indicating the violator's awareness and wilful disregard of legal obligations.