For real options,the current value of the underlying asset is equivalent to the present value of the estimated ____ associated with the underlying asset.
A) capital expenditures
B) cash flows
C) profits
D) exercise price

Question

Quizplus · Accepted Answer

The current value of the underlying asset in real options analysis is equivalent to the present value of the estimated cash flows associated with the underlying asset. Real options analysis focuses on the potential future cash flows and the flexibility to change strategic decisions that could impact those cash flows, rather than just the exercise price or profits. Therefore, the correct choice is B - cash flows.

For Real Options,the Current Value of the Underlying Asset Is