Dear Sir,
In suggested answer from ACCA, it stated that:
"Estimated total value arising from the two real options
Value of Jigu Project: $15,258,399
Value of Honua Co’s offer: $2,409,899"
I can understand separately the calculation of each real options, but I dont stll clear the reason why they should add these two figures together to get the total value from 2 real options?
The question only asked us about the estimated value of the offer from Honua Co, so I supposed it should be the value of put option (i..e $2.4 million)
Please help me clarify it. Thank you so much.
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Talam 2019 Dec
2y ago#1Part (b)(iii) of the question asks you to assess whether the Uwa project should be undertaken. Both of the options available increase the benefit from the project. Both options are available - there is the option to sell to Honshu and also the option of the follow-on project which according to the question can be done even if Uwa is sold to Honshu.
Oh, I got it. Thank you so much.
Your explanation make it more simple than I thought.
So, in case 1 project have more than 1 option (eg 5, 10 ... options), we must take into account the value of each option, is it right?
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