5. Real options analysis (20 points)
Consider the following strategic (real) options situations:
- Is there benefit to waiting 1-2 years?
- Is there benefit to starting the project but then later abandoning the project? In other words, how much of the $340 million investment is redeployable for other uses if we decide to later stop the project?
- How should we think about possible growth options (i.e., consideration of plants beyond the first one)? Keep in mind that Ken would ultimately like to build 3-4 plants.5. Real options analysis (20 points)
Consider the following strategic (real) options situations:
- Is there benefit to waiting 1-2 years?
- Is there benefit to starting the project but then later abandoning the project? In other words, how much of the $340 million investment is redeployable for other uses if we decide to later stop the project?
- How should we think about possible growth options (i.e., consideration of plants beyond the first one)? Keep in mind that Ken would ultimately like to build 3-4 plants.
