The Management at Sevenglobe Motors Considered the Option to Abandon

question 19

Multiple Choice

The management at Sevenglobe Motors considered the option to abandon when building their new manufacturing plant. The design of the plant allows it to easily be converted to manufacture other types of large machinery. If their new line of cars is poorly received, their plant should be easy to sell to another manufacturing company. In this example, the extra cost of building the plant in such a way that it can easily be converted for other uses 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 on the plant.

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Definitions:

VALS Framework

A psychographic segmentation tool that classifies consumers based on their values, attitudes, and lifestyles.

Psychological Resources

Mental and emotional assets that help individuals cope with life's challenges, such as resilience, self-esteem, and optimism.

Material Resources

Physical or tangible assets that are used in the production or supply of goods and services.

Survivors

Individuals or entities that remain active or viable after a particularly challenging period or event, often having adapted to new conditions.