In Section 22.4 we described the problem faced by a utility that was contemplating an investment in

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In Section 22.4 we described the problem faced by a utility that was contemplating an investment in equipment that would allow it to burn either oil or gas. How would the value of the option to cofire be affected if

(a) The prices of both oil and gas were very variable, but

(b) The prices of oil and gas were highly correlated?

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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Question Posted: Jun 09, 2011 05:31 AM

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In Section 22.4 we described the problem faced by a utility that was contemplating an investment in

Question:

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a In general an increase in variability increases the value of an option ...View the full answer

Principles of Corporate Finance

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