The Major Advantage of Real Option Theory Over the Decision

question 7

Multiple Choice

The major advantage of real option theory over the decision tree approach for analyzing land value and development decision making is:

• A) Option theory is simpler and less prone to making mistakes.
• B) Option theory allows a more detailed and realistic model of complex development staging and design alternatives.
• C) Option theory is a complete economic model based on the concept of market equilibrium, and therefore does not require as much prior knowledge about the opportunity cost of capital discount rates or expected returns).
• D) Decision tree analysis does not allow for the time-to-build time required for construction), and assumes that future values follow a normal or Gaussian) distribution with no autocorrelation "efficient markets assumption").

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Individuals or entities that possess assets of significant value, such as stocks, bonds, real estate, and cash.

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United States

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Income Inequality

The uneven distribution of income within a population, leading to disparities in wealth and living standards among different socio-economic groups.