A manufacturer of peripheral devices for pcs decides to try and capture some of the pc gaming market by creating gaming versions of its traditional peripheral devices. It decides to start with a gaming version of its standard keyboard, increasing the number of macro keys, adding a small lcd screen to display game data, and giving the user the ability to backlight keys in different colors. If this device is a success, the manufacturer plans to release gaming versions of its trackballs and other peripherals. What option is the manufacturer gaining by the release of the new keyboard?.

An expansion option is a type of embedded option that enables the company that bought a real option (the right to perform certain actions) to grow its business in the future at minimal or no cost.

Unlike traditional options, which derive their value from an underlying security, an expansion option derives its value from the versatility it provides to a firm.

After a company has completed the first milestone of a capital project, the extension option can help them decide whether to proceed with the project.

In this case the manufacturer is trying to break into the PC gaming market by releasing a new keyboard.

He's not putting anything off over here.

He's also not going to give up the peripherals business, or switch from a peripheral maker to just focusing on gaming. #

Asmasaadatkhan Asmasaadatkhan · Answer 2 · 2022-08-20T20:09:40+02:00

The option to expand is a kind of embedded option that can allow the firm to acquire an actual option to expand its business in the future for little to no additional expense.

An expansion option's value is derived from the freedom it provides to a corporation, as opposed to regular options, which get their underlying asset. A business may choose to move forward with a capital project after completing the first milestone with the support of the expansion option. In this instance, the company is introducing a new keyboard in an effort to penetrate the PC gaming sector.

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