The Management at PhoneUn Considered the Option to Abandon When

question 31

Multiple Choice

The management at PhoneUn considered the option to abandon when building their new manufacturing plant. The design of the plant allows it to be easily converted to manufacture other types of large machinery. If its new line of cars is poorly received, its plant should be easy to sell to another manufacturing company. In this example, the price at which they expect to sell the plant if things go poorly resembles:

• A) the premium of a put option on the plant.
• B) the premium of a call option on the plant.
• C) the strike price of a put option on the plant.
• D) the strike price of a call option the plant.

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Definitions:

Under Benefited

A feeling or situation where an individual perceives they are receiving less reward than they deserve compared to others.

Overbenefited

A situation where one receives more benefits or resources than what is fair or deserved.

Inequity

A condition under which fair treatment is not received or given, often leading to disparities among individuals or groups.

Inequality

The state of not being equal, especially in status, rights, and opportunities.