Which of the Following Best Describes Real Options

question 9

Multiple Choice

Which of the following best describes real options?

• A)Real options change the size, but not the risk, of projects' expected cash flows.
• B)Real options change the risk, but not the size, of projects' expected cash flows.
• C)Real options are likely to reduce the cost of capital that should be used to discount a project's expected cash flows.
• D)Very few projects actually have real options.

Analyze the impact of taxes on market equilibrium, including changes in surplus and tax revenue.

Identify how taxes shift supply and demand curves.

Calculate the total surplus before and after a tax is imposed.

Distinguish between consumer and producer surplus before and after taxation.

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Definitions:

Average Price

The mean price of a good or service calculated by dividing the sum of the prices of all the items by the number of items.

Overhead Volume Variance

Overhead volume variance is the difference between the budgeted overhead at standard production volumes and the actual overhead incurred due to variance in production volume.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels.

Direct Materials Quantity Variance

The difference between the actual quantity of direct materials used in production and the standard quantity expected to be used, multiplied by the standard cost per unit.