Question

Elegance Inc. is a large cosmetics company that made an initial small investment in a start-up company, Peace Planet, which was developing an organic face lotion. This gave Elegance controlling interests in the start-up company. However, Peace Planet soon began to have financial difficulties because of principal-agent problems. As a result, Elegance did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as aA. credible commitment.B. real-options perspective.C. break-even analysis.D. partial joint venture.

Answer 1

Real Option perspective

Step-by-step explanation:

The reason is that in a real option the management has the choice either proceed, abandon, wait, etc are the real case of the projects or investment's tangible asset (Not a financial instrument) and hence are real option.

In this case, the real option that the management has opted is option to abandon the investment operation.