Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 14, Problem 4Q
If a company has an option to abandon a project, would this tend to make the company more or less likely to accept the project today?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
If a company has an option to abandon a project, would this tend to makethe company more or less likely to accept the project today?
what does it mean if the npv and irr are both negative quora, should the company invest in the project or not?
Should companies bid for a project with a price under the "project bid price"?
No, this will not make financial sense.
It depends on the project payback time.
Yes, because they will still have positive profits.
Chapter 14 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 14 - Prob. 1QCh. 14 - Prob. 2QCh. 14 - Prob. 3QCh. 14 - If a company has an option to abandon a project,...Ch. 14 - Investment Timing Option: Option Analysis
Rework...Ch. 14 - Prob. 7PCh. 14 - Prob. 1MCCh. 14 - What are five possible procedures for analyzing a...Ch. 14 - Tropical Sweets is considering a project that will...Ch. 14 - Prob. 4MC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- 1) What is the company's WACC? 2) Should the company take the projects? Assume that the projects have the same risk as an average project for your firm. 3) If one project is depended on the other in a way that the company can only take both projects, should it take it?arrow_forwardWhich of the following contributes positively to the value of a real option to delay investment? First-mover competitive advantages It lowers idiosyncratic risk, and thus the firm's cost of capital Delaying project revenues, due to TVM The likely resolution of some uncertaintyarrow_forwardIs the project viable or not? Suggest reasonsarrow_forward
- Should the project be accepted or rejected?arrow_forwardWhy might a company want to invest in a company rather than buy it outright? Wouldn't they have more say if they bought the company?arrow_forwardIn general, do timing options make it more or less likely that a project willbe accepted today?arrow_forward
- If a firm fails to consider growth options, would this cause it to underestimate oroverestimate projects’ NPVs? Explain.arrow_forward2. Which of the following statements is false? (a) If the payback period is less than the maximum acceptable payback period, accept the project. (b) If the payback period is greater than the maximum acceptable payback period, reject the project. (c) If the payback period is less than the maximum acceptable payback period, reject the project (d) Two of the above. 3. Should Pharms company accept a new project if its maximum payback is 3.5 years and its initial cost is P5,000,000 and it is expected to provide operating cash inflows of P1,800,000 in year 1, P900,000 in year 2, P600,000 in year 3 and P1,800,000 in year 4? (a) Yes. (c) It depends. (b) No. 4. (d) None of the above. 4. What is the NPV for the following project if its cost of capital is 15 percent and its initial cost is P5,000,000 and it is expected to provide operating cash inflows of P1,800,000 in year 1, P900,000 in year 2, P600,000 in year 3 and P1,800,000 in year 4? (a) P1,700,000 (b) P371,764 (c) (P137,053) (d)…arrow_forwardSuppose your firm could purchase another firm for only half its replacement value.Would that be a sufficient justification for the acquisition? Explain.arrow_forward
- Option values are extinguished when they areexercised. How does this influence capital budgeting decisions? What considerations, or typesof analysis, might lead management to “take theplunge” and proceed with a project rather thankeep delaying it?arrow_forwardWhat happens when "pet" projects do not have the requisite NPV or IRR? Do pet projects seem to be approved over other more viable projects? Why does this happen?arrow_forwardSuppose your firm could purchase another firm for only half of itsreplacement value. Would that be a sufficient justification for theacquisition? Why or why not?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Accounting for Derivatives Comprehensive Guide; Author: WallStreetMojo;https://www.youtube.com/watch?v=9D-0LoM4dy4;License: Standard YouTube License, CC-BY
Option Trading Basics-Simplest Explanation; Author: Sky View Trading;https://www.youtube.com/watch?v=joJ8mbwuYW8;License: Standard YouTube License, CC-BY