A firm in the mining industry whose major assets are cash, equipment, and a closed facility may sell at a premium to the market value of its assets.This premium is most plausibly attributed to
A)nearsighted investors.
B)the low exercise price held by its shareholders.
C)the option to open the facility when prices rise dramatically.
D)All of the options are correct.

Question

Quizplus · Accepted Answer

The premium that the mining firm is able to sell for can likely be attributed to the option that it holds to open its closed facility in the future when prices rise. This option adds value to the firm beyond just the market value of its assets, making it more attractive to potential buyers. Nearsighted investors or a low exercise price held by its shareholders may have some impact on the firm's sale price, but the option to open the facility is likely the primary factor driving the premium.

A Firm in the Mining Industry Whose Major Assets Are