Which of the following is likely to be true of a valuable abandonment option?

Question

Quizplus · Accepted Answer

A valuable abandonment option allows for the project to be ended early if it is not performing well, reducing the project's risk. Additionally, by giving the option to abandon the project if it becomes unprofitable, the expected NPV of the project improves as it accounts for the possibility of negative outcomes being avoided. Therefore, both b. and c. are correct. Answer choices a. and d. are incorrect as the presence of a valuable abandonment option does not necessarily guarantee that all possible outcomes will have an NPV of at least zero.

Which of the Following Is Likely to Be True of a Valuable