Which of the Following Is an Advantage of Using the Real

question 34

Multiple Choice

Which of the following is an 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) It is useful as technology investment scenarios often conform to the same capital market assumptions upon which the approach is based.
• 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 in technology trajectories.

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Definitions:

Multicollinearity

Multicollinearity occurs when independent variables in a regression model are highly correlated, potentially distorting the results and making coefficients unreliable.

Standard Errors

Measures that provide an estimation of the variability or precision of a sample statistic as an estimate of a population parameter.

Slope Coefficients

In linear regression, the numerical values that multiply the predictor variables, representing the change in the response variable for a one-unit change in the predictor.

Multicollinearity

A statistical phenomenon in which two or more predictor variables in a multiple regression model are highly correlated, potentially undermining the statistical validity of the model.