What Is the Advantage of Using the Real Options Approach

question 49

Multiple Choice

What is the advantage of using the real options approach of evaluating a project?

• A) It results in better technology investment decisions than a cash flow analysis approach.
• B) A firm undertaking solo new product development does not require full investment in the technology before determining if the technology will be successful.
• C) It is cheap to use in case of a firm undertaking solo new product development.
• D) It is valuable only when there is no uncertainty.

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Definitions:

Bilateral Contract

A type of contract involving two parties where each party makes a promise to the other, thus forming mutual obligations.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, intended to standardize regulations across the states to facilitate easier interstate commerce.

Model Code

A systematically arranged collection or compendium of guidelines, rules, or regulations that is designed to serve as a template or reference for legal reform or drafting.

Commercial Transactions

Business dealings or the exchange of goods, services, or financial assets between parties in the marketplace.