Brandt 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) $55.08
B) $57.98
C) $61.03
D) $64.08
E) $67.29

Question

Brandt 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) $55.08 
B) $57.98 
C) $61.03 
D) $64.08 
E) $67.29

Quizplus · Accepted Answer

11ea42d0_c094_cf99_9abf_8f61d7f85ea7_TB2090_00

Brandt Enterprises Is Considering a New Project That Has a Cost