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

question 15

Multiple Choice

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

• A)The existence of a real option may either increase or decrease the value of the project..
• B)The existence of a real option can lower the cost of capital associated with a project.
• C)Real options are very rare in practice.
• D)The existence of a real option may change the magnitude, but not the uncertainty, underlying expected future cash flows from the project.

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Definitions:

Illusory Correlations

The perception of a relationship between two variables even when no such relationship exists.

Demand Characteristics

Cues in an experiment that suggest to participants what behavior is expected of them.

Falsifiability

The capability of a hypothesis or theory to be proven false, a critical principle for scientific validity.

Parsimony

In science and philosophy, the principle that the simplest explanation of an event or observation is preferred over a more complex explanation.