Business, 12.08.2020 06:01 destromero

Applications of option pricing to corporate finance Fantastique Inc. has a one-year proprietary license to develop software essential for creation of a new generation of FastGadgets. The project’s estimated cost is $25 million. If consumers love the new FastGadget, Fantastique’s revenues will skyrocket. Otherwise, if sales of FastGadgets turn out to be low, Fantastique will be ruined. Fantastique has an option similar to a option, which enables it to minimize the risk by taking the following action:. A. Wait for a year and then undertake the project if there is a great demand for the FastGadget.
B. Undertake the project now to get ahead of the industry in creating the software.
C. Abandon the project now because it is too risky.
D. Wait for a year and then sell the license if consumers love FastGadget.

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Applications of option pricing to corporate finance Fantastique Inc. has a one-year proprietary lice...