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?
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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? |
Explanation
Abandonment option gives the benefits to the company to reduce the capacity or potential of the project or close the project in case when the market condition is not favourable.
As abandonment option provides benefits to close the project or reduce the capacity hence the investor will be likely to accept the project today as they can withdraw anytime depending upon the market conditions.
Verified Answer
The project will be more likely to be accepted today in case of abandon project option.
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