Aggarwal Enterprises Is Considering a New Project That Has a Cost

question 12

Multiple Choice

Aggarwal Enterprises is considering a new project that has a cost of $1,000,000,and the CFO set up the following simple decision tree to show its three most-likely scenarios.The firm could arrange with its work force and suppliers to cease operations at the end of Year 1 should it choose to do so,but to obtain this abandonment option,it would have to make a payment to those parties.How much is the option to abandon worth to the firm?

• A) $77.8
• B) $90.0
• C) $64.8
• D) $63.3
• E) $76.3

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Definitions:

Homeostasis

The process by which biological systems tend to maintain stability while adjusting to conditions that are optimal for survival.

Primary Drives

Basic, innate urges that motivate behavior necessary for survival, such as hunger, thirst, sleep, and avoidance of pain.

Secondary Drives

Learned drives that are derived from primary drives or arising from learned associations with satisfying basic needs.

Need

A requirement of some material (such as food or water) that is essential for survival of the organism.