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20210204060324discussion 1

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Student’s Name
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February 4, 2020

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Discussion
Question 1
a)
Expansion means that there will be increased volume of production. The inherent option
here is abandonment and postponing production. This is because product demand should be high
given the expected increased volume of production with the expansion. While the expansion has
a positive NPV on the discounted cash flow basis, the increased products due to expansion need
to find a market in order to maintain the positive cash flow (Bromiley et.al, 2016). This means
that expansion when the demand is low will means that the cash flow will be negatively affected
as cost of production is high due to expansion and goods are not being bought due to low
demand. It is therefore important to wait until buyers have a demand for the products and
services offered.
b)
The inherent option in this case is the timing option. This means that the company should
ensure that the digital switching equipment should be made available when there is a string
market ground or position. Strategic planning should be used to ensure that production and
marketing for the products are done when demand is high or in seasons when digital equipment
are high in demand. The option seller in this case has to be involved. The seller in this case is
Western Telecom and its retailers. They should be involved in identifying when the best timing
for the products are based on market patterns of seasonality.

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Student’s Name Course Code Professor February 4, 2020 Discussion Question 1 a) Expansion means that there will be increased volume of production. The inherent option here is abandonment and postponing production. This is because product demand should be high given the expected increased volume of production with the expansion. While the expansion has a positive NPV on the discounted cash flow basis, the increased products due to expansion need to find a market in order to maintain the positive cash flow (Bromiley et.al, 2016). This means that expansion when the demand is low will means that the cash flow will be negatively affected as cost of production is high due to expansion and goods are not being bought due to low demand. It is therefore important to wait until buyers have a demand for the products and services offered. b) The inherent option in this case is the timing option. This means that the company should ensure that the digital switching equipment should be made available when there is a string market ground or position. Strategic planning should be used to ensure that production and marketing for the products are done when demand is high or in seasons when digital equipment are high in demand. The option seller in this case has to be involved. The seller in this case is Western Telecom and its retailers. They should be involved in identifying when the best timing for the products are based on market patterns of seasonality. c) The abandonment option is inhe ...
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