Which of the Following Is NOT a Typical Real Option

question 110

Multiple Choice

Which of the following is NOT a typical real option in capital budgeting?

• A) The option to expand the project
• B) The option to abandon the project
• C) The option to reduce the scale of a project
• D) The option to discount the project at a lower rate of return

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Definitions:

Accrued Expenses

Expenses that have been incurred but not yet paid for, often recognized in the accounting period they are incurred.

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting, which may or may not align with the calendar year.

Straight-Line Depreciation

An approach to evenly spread the cost of a tangible asset throughout its period of use.

Time Period Assumption

The accounting principle that allows the business operations to be divided into specific time periods such as months, quarters, or years for reporting purposes.