Which of the Following Statements Regarding Real Options Is NOT

question 63

Multiple Choice

Which of the following statements regarding real options is NOT correct?

• A) Real options should only be exercised when they increase the NPV of a project.
• B) Real options enhance the forecast of a project's expected future cash flows by incorporating, at the start of the project, the effect of decisions that will be made at a later date.
• C) Real options give owners the right, but not the obligation, to exercise these opportunities at a later date.
• D) Real options build greater flexibility into a project and thus increase its net present value (NPV).

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Definitions:

Generate Ideas

The process of brainstorming and conceptualizing new concepts, solutions, or innovations to address specific issues or opportunities.

Common Form

A standard or widely used structure or format, often referring to legal documents.

Value

The importance, worth, or usefulness of something to someone, often measured in terms of its utility or monetary worth.

Opposite

Being entirely different or sharply contrasting in position, direction, or character.