Use the Information for the Question(s)below

question 35

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%.
-Assume that you are not able to sell the plant,but you are able to shut down the plant at no cost at any time.Given the embedded option to abandon production,the value of your plant will be closest to:

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

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Definitions:

Interview

A structured conversation where one participant asks questions and the other provides answers, commonly used in research and employment selection.

Time-Consuming

Describes tasks or processes that require a significant amount of time to complete, often more than is desirable.

Probability Sampling

A sampling method in which every member of a population has a known and typically equal chance of being selected for research or survey.

Target Population

The specific group of individuals that a research study or marketing campaign is designed to analyze or reach.