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Question - ANALYZING A STRATEGY USING OPTION ANALYSIS Reliable Industries is considering the construction of a power plant investment in India. Reliable's analysts calculate that the cost of building the plant is $600 million, and the IRR of the plant is 13%. The analysts also estimate that, given the experience of building the first plant, a second plant can be built for $550 million and additional plants can be built for about $500 million each.

a. How would you go about evaluating whether or not to build this power plant in India?

b. Are you evaluating a project or a strategy?

c. How does the risk associated with the power plant strategy compare with the risk associated with the individual power plants?

Titman, Sheridan; Martin, John D. (2014-04-08). Valuation (2nd Edition) (Prentice Hall Series in Finance) (Page 507). Prentice Hall. Kindle Edition.

Reference no: EM132016998

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