The potential decision to abandon a project has option value because:
A)abandonment can occur at one specific point in the future.
B)a project may be worth more dead than alive.
C)management is locked into a negative outcome.
D)future demand may exceed expectations.
E)the project may be worth more if its commencement is delayed.

Question

Quizplus · Accepted Answer

The option to abandon a project has value because it provides the opportunity to cut losses and potentially salvage some value from the project. In some cases, the project may be worth more dead (i.e. through sale of assets, termination of costly contracts or operations) than alive.

The Potential Decision to Abandon a Project Has Option Value