The NPV Investment Decision Rule Is Applicable Even in the Case

question 16

Multiple Choice

The NPV investment decision rule is applicable even in the case of a real option, such as a real estate development investment decision, because:

• A) The NPV rule states that any investment with a positive NPV should be undertaken.
• B) The real options nature of development enables a negative NPV investment to be rational.
• C) The NPV rule will insure that a development project that presents a higher IRR will be chosen over one that presents a lower IRR.
• D) The NPV rule requires making the decision that maximizes the NPV over all mutually exclusive alternatives, and building today versus waiting are mutually exclusive alternatives on a given piece of land.

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Definitions:

Selection Effectiveness

The degree to which natural selection is able to influence the frequency of alleles in a population, impacting genetic diversity.

Founder Effect

A genetic phenomenon that occurs when a new population is established by a very small number of individuals, leading to significant genetic drift.

Allele Frequencies

The relative frequencies of all the different alleles of a gene in a given population.

Genetic Drift

The process in which allele frequencies within a population change randomly with no influence from selective pressures, often affecting smaller populations more significantly.