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MCQ- Depreciable base, real option

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A stock is currently selling for $25. A 6-month call option on the stock has a strike price of $30 and sells for $0.50. Calculate the exercise value of the option?
$0.00
$4.50
$5.00
$24.50
none of the above
Which of the following is not a real option?
The option to switch the type of vehicle manufactured in a plant
The option to expand into a foreign country
The option to buy shares of stock if its price goes up.
The option to abandon a project.
none of the above
The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?
$2.99
$2.70
$2.43
$3.29
$3.62
A company purchases equipment for $5 million, incurs shipping costs of $30,000 and installation costs of $50,000. It also requires additional net working capital of $100,000. What is the depreciable base?
$5,000,000
$5,180,000
$5,080,000
$5,030,000
none of the above
Which of the following is an example of a real option?
An option to buy stock at a specified price for a specified period of time
An option to sell stock at a specified price for a specified period of time
An option to invest in a project today or to wait a year.
An option to buy either an American or European option
none of the above

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Solution Summary

MCQ's related to real option, depreciable base.

Solution provided by:
Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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