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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