Which Real Options Have the Ability to Increase a Project's

question 10

Multiple Choice

Which real options have the ability to increase a project's NPV if they are included in project analysis?

• A)Options to wait and to abandon
• B)Options to expand and to wait
• C)Options to abandon and to expand
• D)Options to wait,abandon,and expand
• E)Real options do not affect a project's NPV

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Definitions:

Convertible Preferred Stock

A type of preferred stock that gives the holder the option to convert the shares into a fixed number of common shares after a predetermined date.

Common Stock

A type of security that signifies part ownership in a corporation, referred to as corporate equity ownership.

Par Value

The face value of a bond or stock as stated by the issuer, not necessarily its market value.

Transaction Fee

A charge assessed for processing a financial transaction, commonly found in banking and brokerage services.