Which One of the Following Statements Is Most CORRECT

question 4

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) few projects actually have real options. They are theoretically interesting but of little practical importance.
• E) Real options are more valuable when there is little uncertainty about the true values of future sales and costs.

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Definitions:

Mere Exposure Effect

A psychological phenomenon where individuals develop a preference for things simply because they are familiar with them.

Proximity

The physical closeness or distance between two points or objects, often influencing the relationship or interaction between them.

Similarity

The state or fact of being alike or having common features, which can lead to the grouping of objects or ideas in cognitive processes.

Physical Attractiveness

The degree to which a person's physical features are considered aesthetically pleasing or beautiful by others.