Which of the Following Statements Is False

question 23

Multiple Choice

Which of the following statements is false?

• A) It is tempting to use the Black-Scholes formula to value future growth options, but often there are good reasons why this formula might not price these options correctly.
• B) When a firm has a real option to invest in the future it is known as a growth option.
• C) Because growth options have value, they contribute to the value of any firm that has future possible investment opportunities.
• D) Future growth opportunities can be thought of as a collection of real put options on potential projects.

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Definitions:

Stock Ownership

Stock ownership refers to the possession of shares in a corporation, which represents a claim on part of the company's assets and earnings.

Residual View

In corporate finance, this concept suggests that dividends should be paid from the residual or remaining equity after all project investments with positive NPV have been funded.

Dividends

Payments made by a corporation to its shareholder members, representing a portion of the corporate profits.

Transaction Costs

Expenses incurred when buying or selling securities, including broker fees, commissions, and other charges.