ECO359H5 : Practice problem--it's very helpful ~
Document Summary
Eco 359 practice problems 3: ross et al. s corporate finance text has a number of questions on real options at the end of. To familiarize yourself with the concept i advise you to try a few of these questions: an independent toronto movie company has hired you as a consultant. They have just finished filming their first blockbuster-to-be and are trying to determine the best strategy for its release. The company is well-known and respected among the local movie-goers, and the movie is guaranteed to make ,000 in revenues if released in toronto only (without any additional costs incurred). The outcome of the world-wide release is uncertain. The launch will require additional expenses of ,000 -- mainly for the marketing campaign, without it the company will make zero profits outside toronto. This promotion campaign can backfire, as it will reveal the (possibly very low) movie quality to everybody, including the loyal toronto audience.