Question 1

A firm in the extraction industry whose major assets are cash,equipment and a closed facility may appear to have extraordinary value.This value can be primarily attributed to:

Accepted Answer

A) the potential sale of the company. 
B) the low exercise price held by the shareholders. 
C) the option to open the facility when prices rise dramatically. 
D) All of the above. 
E) None of the above.

Question 2

The Nu-Tech Company has a new project available to it at a cost of $6,000,000.If the project is accepted,the company will be able to sell 13,000 personal organizers at $172 in net cash flow for each of the next five years.Nu-Tech's discount rate is 15%.What is the NPV of the investment? The executives of Nu-Tech are concerned about the potential of future competition and a subsequent drop in sales and price.If after two years you can dispose of the asset for $1,000,000 at what price would it make sense to abandon the project?

Accepted Answer

The answer of The Nu-Tech Company has a new project...

Exam 23: Options and Corporate Finance: Extensions and Applications

A firm in the extraction industry whose major assets are cash,equipment and a closed facility may appear to have extraordinary value.This value can be primarily attributed to: