Which of the Following Most Accurately Lists the Steps in the Four-Step

question 6

Multiple Choice

Which of the following most accurately lists the steps in the four-step process for valuing flexibility in the correct order?

• A)1.Estimate NPV without flexibility.2.Model uncertainty in event tree.3.Model flexibility in decision tree.4.Estimate contingent NPV.
• B)1.Estimate NPV without flexibility.2.Model flexibility in decision tree.3.Model uncertainty in event tree.4.Estimate contingent NPV.
• C)1.Model uncertainty using real-option valuation.2.Model flexibility using decision tree analysis.3.Estimate NPV without flexibility.4.Arithmetically weight the three results to estimate contingent NPV.
• D)1.Model uncertainty using real-option valuation.2.Model flexibility using decision tree analysis.3.Estimate NPV without flexibility.4.Geometrically weight the three results to estimate contingent NPV.

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Definitions:

Hypotheses

Tentative explanations or propositions made on the basis of limited evidence as a starting point for further investigation.

Observations

The process of monitoring, recording, and analyzing phenomena to obtain information or awareness about certain conditions or situations.

Research Measurements

Research measurements involve the processes and instruments used to quantify variables in research, allowing for the collection of data needed to test hypotheses.

Knowledge Transformation

The process of converting knowledge from one form, modality, or context to another to enhance understanding, application, or innovation.