One of the Pitfalls of Real Options Analysis Is That

question 88

Multiple Choice

One of the pitfalls of real options analysis is that managers may have an incentive and know-how to game the system and back-solve a formula to get a proposal approved.This can give rise to

• A) managerial conceit.
• B) the illusion of control.
• C) escalation of commitment.
• D) agency problems.

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Definitions:

Long Term Strategic

Pertaining to long-range planning and actions aimed at achieving major goals or objectives.

Marketing Costs

Expenses related to promoting, selling, and distributing a product or service.

Design Costs

Expenses incurred during the planning and development phase of a product, including labor, materials, and overhead associated with creating the design.

Research and Development

Activities undertaken by companies or governments in innovation and improvement of services or products.