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Real Option: Exclusive Rights

How important is it that an organization have an exclusive right to exercise a real option? That is, can we really say that an option being considered has value if competitors may exercise it also?

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How important is it that an organization has an exclusive right to exercise a real option? That is, can we really say that an option being considered has value if competitors may exercise it also?

A real option is a choice or alternative that is available to a business when it is making investment decisions. These real options are applied to real investments such as product line extensions, manufacturing plants, or research and development. They options are whether to expand, extend or abandon a real investment (Weyant & Zhu, 2003).

Though it is very important and profitable for firms to have exclusive rights to exercise real options since the option will be very valuable if the competitors are not able to exercise it or imitate it, in real life the options that ...

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This solution provides a detailed discussion of the given finance question regarding exclusive rights to exercise a real option.

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