PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 22, Problem 6PS

Expansion options* Look again at the valuation in Table 22.2 of the option to invest in the Mark II project. Consider a change in each of the following inputs. Would the change increase or decrease the value of the expansion option?

  1. a. Increased uncertainty (higher standard deviation).
  2. b. More optimistic forecast (higher expected value) of the Mark II in 1985.
  3. c. Increase in the required investment in 1985.
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