Ask Question
BusinessBusiness
17 April, 09:17

Sometimes a cost must be incurred to obtain an abandonment option. this cost should be incurred if and only if the value of the option exceeds its cost. the value of an abandonment option can be estimated by first calculating the value of the project considering the possibility of abandonment, then subtracting the value of the project if it could not be abandoned. the difference in values is the value of the abandonment option. true or false

+1
Answers (1)
  1. 17 April, 10:19
    0
    Answer: False

    An abandonment option is a feature which protects each party's financial interest in the event an investment fails to earn. It gives a party a right to withdraw from a contract before its maturity.

    An abandonment value, on the other hand, is the liquidation value of the asset and can be calculated by subtracting the net present value of the investment from the initial value. If it is negative, then an abandonment option is exercised.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Sometimes a cost must be incurred to obtain an abandonment option. this cost should be incurred if and only if the value of the option ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
The journal entry to record the prior year's deferred Inflows: property taxes (those expected to be collected more than 60 days beyond year-end) as revenue in the current year would include: a. A credit to Revenues Control. b.
Answers (1)
Which rehearsal is used to determine how a subordinate leader intends to accomplish the mission?
Answers (1)
Suppose there are only two goods produced in an economy: phones and meals. Maria is adept at assembling electronics but has poor skills at preparing food. Mike is an accomplished chef but is not very skilled at assembling electronics.
Answers (1)
The bank statement for Lee Co. revealed a balance of $1,200 while the checkbook balance showed $1,600. Checks outstanding totaled $50. A check printing charge for $7.00 was on the bank statement. There was a $100 NSF shown on the bank statement.
Answers (1)
Which rule requires that contracts that would normally fall under the statute of frauds and need writing if negotiated by the principal must be in writing even if negotiated by an agent?
Answers (1)
New Questions in Business
Janet has identified four features of a college to which she is planning to apply for admission. Identify the pros and cons of Janet's choice of college.
Answers (1)
Which is riskier, but has the potential for a higher rate of return? saving or investing
Answers (2)
You are comparing two annuities. Annuity A pays $100 at the end of each month for 10 years. Annuity B pays $100 at the beginning of each month for 10 years. The rate of return on both annuities is 8 percent.
Answers (1)
What will you call an employee who prioritize her goals rather than the team goal?
Answers (1)
Vertical integration allows the firm to gain market power as the firm develops the ability to save on its operations, avoid market costs, improve product quality, and possibly protect its technology from its rivals. A. True B. False
Answers (1)
Home » Business » Sometimes a cost must be incurred to obtain an abandonment option. this cost should be incurred if and only if the value of the option exceeds its cost.
Sign Up Forgot Password?