Which of the Following Statements Is FALSE

question 22

Multiple Choice

Which of the following statements is FALSE?

• A)It is tempting to use the Black-Scholes formula to value future growth options,but often there are good reasons why this formula might not price these options correctly.
• B)When a firm has a real option to invest in the future it is known as a growth option.
• C)Because growth options have value,they contribute to the value of any firm that has future possible investment opportunities.
• D)Future growth opportunities can be thought of as a collection of real put options on potential projects.

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Definitions:

Cash Basis

An accounting method that recognizes revenues and expenses only when cash is exchanged.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid, regardless of when the transactions occurred.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor used in creating the good.

Direct Method

A cash flow statement presentation method that shows actual cash inflows and outflows from operating activities, as opposed to the indirect method which starts with net income and adjusts for non-cash transactions.