One of the Potential Special Problems with an Option to Abandon

question 42

Multiple Choice

One of the potential special problems with an option to abandon is that:

• A)it can cost the firm more than the original investment.
• B)competitors will try to buy the project at a reduced price.
• C)there may be restrictions in the foreign country where the project is located that prevent or complicate abandonment of the project.
• D)the parent may not want to abandon the project.

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Definitions:

Bound Agreement

A legally binding contract or arrangement between parties.

Illusory Promise

An agreement that lacks a true commitment from the promisor, making it unenforceable as a contract.

Accord

An agreement between parties to settle a dispute or obligation.

Satisfaction

The fulfilment of a requirement, payment of a debt, or resolution of a claim.