Value of project + abandonment option

AFM

Sir in Iluustration 26, value of project + abandonment calulated as (PV of Inflows - Investment + value of abandonment) But in this question value of project considered as Investment (Investment + value of abandonment) Video Details ------------- Advanced Financial Management - AFM Derivatives Analysis and Valuation #161. Illustration # 37 - Real Options - Nov'24

Hemachandra D

CA Final

★ 9K+

28-Jan-25 01:59

396

Answers (1)

Good point If u read the questions you will notice a diff In q 26 they are asking whether we should invest or not so NPV is the relevant metric In this Q value of option and value of project with option refer to overall value of the project and not the NPV

Sriram Somayajula

Admin

28-Jan-25 07:18