Which One of the Following Statements Is Most CORRECT

question 10

Multiple Choice

Which one of the following statements is most CORRECT?

• A) Real options change the size,but not the risk,of projects' expected NPVs.
• B) Real options change the risk,but not the size,of projects' expected NPVs.
• C) Real options can reduce the cost of capital that should be used to discount a project's expected cash flows.
• D) Very few projects actually have real options.They are theoretically interesting but of little practical importance.
• E) Real options are more valuable when there is very little uncertainty about the true values of future sales and costs.

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Definitions:

Recency Effect

The psychological phenomenon where the most recently presented information is remembered better than earlier information.

Sequence Order Effect

The phenomenon where the order in which items are presented affects the recall or understanding of those items.

Reconstruction

An account of an event that has been pieced together from a few highlights.

Bartlett

Frederic Bartlett, a psychologist who is known for his work on memory and cognitive psychology, particularly for his theory of reconstructive memory.