Valuing the Option to Wait

question 69

Multiple Choice

Valuing the option to wait:

• A) can result in a negative option value.
• B) assumes the NPV of a project commenced today is negative.
• C) is unaffected by a project's discount rate.
• D) is dependent upon a wait time of three years or less.
• E) requires at least two NPV calculations as of Time 0.

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Definitions:

Expected Price Level

The anticipated average price across all goods and services in an economy over a future period.

Aggregate Demand

Unified request for the provision of goods and services in an economy, calculated at a specific scale of overall price for a given duration.

Aggregate Supply

The total supply of goods and services that firms in an economy are willing and able to sell at a given price level in a specific time period.

Long Run Aggregate-Supply

In economics, it represents the total quantity of goods and services that producers in an economy are willing and able to supply at a full employment level, regardless of the price level, over a long period.