. 2. Assume that you are the Developer of a major residential estate. You will design and build the residential estate,

[answerhappygod]

2 Assume That You Are The Developer Of A Major Residential Estate You Will Design And Build The Residential Estate 1 (77.51 KiB) Viewed 67 times

. 2. Assume that you are the Developer of a major residential estate. You will design and build the residential estate, as well as finance (equity) it. Assess whether the following scenarios involve real options. For each scenario, consider explicitly the following aspects: • Who has the option? • What the cost of the option is? • What is the strike price? • What type of option is it? (e.g. call, put) • In which conditions the real option is in the money"? (a) Scenario 1: You have the right to sell one apartment to a family before its completion. Discuss if this can be considered a real option. [8 marks] (b) Scenario 2: You are paying the rent on land in the vicinity in case you want to expand your building at a later date. As specified in the rent agreement, you can buy the land anytime within the agreement period at a pre-defined cost. [8 marks] (c) Scenario 3: You sold one apartment in advance. As part of this transaction, the buyer purchased a guarantee package for an additional £5000. As part of this package, the buyer can return the apartment to you one year after the purchase of the apartment, in which case you return the sum of money corresponding to the purchased price paid by the buyer (for the apartment only excluding extra services and fees). [8 marks] (d) Scenario 4: You have the right to suspend the project anytime. If you do so, you will pay an indemnity to the subcontractors involved in the project during the construction. [8 marks]