Each of the Following Is Considered a Limitation of the Real

question 19

Multiple Choice

Each of the following is considered a limitation of the real options model of investment valuation except:

• A) the model is based on cash flow projections, rather than any intangibles.
• B) cumulative volatility adds an explicit incorporation of uncertainty into the model.
• C) the risk exposures are increased relative to other valuation models.
• D) the complexity of the model may act as a deterrent to IT managers from using it.

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Definitions:

Wages Expense

Costs incurred by a company for the payment of wages to its employees, typically reported on the income statement.

Explanation

A statement or account that makes something clear or understandable, often used to provide reasoning or details.

Unearned Consulting Fees

Money received for consulting services that have not yet been provided, representing a liability until the service is performed.

Normal Balance

The side (debit or credit) of an account that is typically increased, reflecting a fundamental principle in accounting.