Which of the Following Statements Is False

question 32

Multiple Choice

Which of the following statements is false?

• A) In particular, because real options allow a decision maker to choose the most attractive alternative after new information has been learned, the presence of real options adds value to an investment opportunity.
• B) To make an investment decision correctly, the value of embedded real options must be included in the decision-making process.
• C) A key distinction between a real option and a financial option is that real options, and the underlying assets on which they are based, are often traded in competitive markets.
• D) We can compute the value of the real option by comparing the expected profit without the real option to the value with the option.

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Definitions:

Financial Statements

Formal records that outline the financial activities and conditions of a business, entity, or individual, including the balance sheet, income statement, and cash flow statement.

Retained Earnings

Funds that are not distributed as dividends but are reserved by the company to reinvest in its business, pay off debt, or save for future use.

Deficit

The amount by which expenses exceed income or liabilities exceed assets.