A Real Option's Value May Be More Than the Amount

question 68

Multiple Choice

A real option's value may be more than the amount by which its inclusion in a capital budgeting project increases the project's expected NPV because the real option may:

• A)reduce the project's risk.
• B)increase the amount the firm makes if the project turns out really well.
• C)reduce the loss if the project fails badly.
• D)a and c

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Definitions:

Prima Facie Evidence

Evidence that, on its face, is sufficient to prove a particular proposition or fact unless refuted by contrary evidence.

Negligence

A failure to exercise the care that a reasonably prudent person would exercise in similar circumstances, leading to harm or damage.

Securities Exchange Act

U.S. legislation that governs the trading of securities, aimed at protecting investors and maintaining fair and orderly markets.

Fraudulent Statements

False or misleading statements made intentionally to deceive, which can result in legal action for fraud.