Real options associated with a project increases managerial flexibility. Assume

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Real options associated with a project increases managerial flexibility. Assume everything else remaining the same, if the uncertainty about a project's future cash flow increases, then The value of the timing option diminishes The value of the option to abandon reduces The value of the abandonment option increases The value of the timing option becomes negative The value of the option to expand is reduced Hammer Company proposes to invest $6 million in a new equipment. The costs are $1.0 million per year. The equipment is expected to last for five year manufacturing cost per hammer is $1 and the selling price per hammers is $6. cost of capital is 20%. Ignore taxes, estimate the breat-even (i.e. NPV = 0) of production per year.

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Real options associated with a project increases managerial flexibility. Assume

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