Real Options Analysis Is Most Appropriate When

question 7

Multiple Choice

Real options analysis is most appropriate when

• A) the total investment required is small, but the environment is uncertain.
• B) the investment required can be justified by Discounted Cash Flow (DCF) techniques.
• C) a small investment up front can be followed by a series of subsequent investments.
• D) there is no prospect of obtaining additional knowledge before making subsequent investments.

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Definitions:

Coefficient Of Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.

Dependent Variable

A factor in a study or model that is anticipated to vary as a result of alterations in the independent variable.

Independent Variable

An experimental variable that is changed or controlled to test its effects on dependent variables.

Coefficient Of Determination

A metric in statistics that evaluates the percentage of variability in the outcome variable that can be explained by the predictor variable(s).