Which of the Following Statements About "Real Options" Is True

question 10

Multiple Choice

Which of the following statements about "real options" is true?

• A)The longer-term the project, the less important they are to consider.
• B)Real options affect only expected cash flows, not the cost of capital associated with a project.
• C)The shorter-term the project, the more important they are to consider.
• D)The longer-term the project, the harder they are to value.

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Definitions:

Marginal Product

The additional output that is produced by using one more unit of a variable input.

Average Product

The output produced per unit of input, calculated by dividing total product by the number of units of input, often used to measure productivity.

Total Cost

The entire financial burden of producing a specific quantity of a good or service, including both fixed and variable costs.

Marginal Cost

The rise in overall expenses associated with producing an additional unit.