Which of the Following Statements Regarding Real Options Is Not

question 4

Multiple Choice

Which of the following statements regarding real options is not true?

• A) Similar to financial options, real options are traded on an open exchange.
• B) Their consideration in capital budgeting analysis is designed to complement conventional DCF models.
• C) They refer to options on real assets (i.e., tangible and intangible property).
• D) They can never reduce the NPV of a proposed investment; they can only increase its NPV.
• E) They represent one way of handling risk and uncertainty in the capital budgeting process.

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Definitions:

Sympathetic Nervous System

Part of the autonomic nervous system that prepares the body for rapid action in situations of stress or danger.

Vigorous Activity

Physical action that is intense and energy-demanding, typically raising the heart rate and improving cardiovascular and muscular fitness.

Sympathetic Nervous System

Part of the autonomic nervous system that increases the body's readiness for action in times of stress, known as the fight or flight response.

Neuron Clusters

Groups of neurons located closely together in the brain, often linked by common functions or processes.