ROPMs value information systems similar to stock options, in that
A) ROPMs can be bought and sold like stocks.
B) a company's worth can be evaluated by the worth of their ROPMs.
C) initial expenditures on IT projects are seen as creating the right to pursue and obtain benefits from the system at a later date.
D) expenditures and benefits from IT projects are seen as inflows and outflows of cash that can be treated themselves like options.

Question

Quizplus · Accepted Answer

ROPMs (Real Options in Project Management) are a way of valuing IT projects that takes into account the flexibility and potential future benefits that the project may provide. It is based on the principle that initial expenditures on IT projects create the right to pursue and obtain benefits from the system at a later date, much like the purchase of a stock option gives the holder the right to buy or sell stock at a future date. Therefore, option valuation techniques are applied to IT projects in order to estimate the potential return on investment, as well as the value of flexibility in managing future uncertainties. ROPMs are not bought or sold like stocks, and are not necessarily indicative of a company's overall worth. Expenditures and benefits from IT projects are also not treated as inflows and outflows of cash that can be treated like options.

ROPMs Value Information Systems Similar to Stock Options, in That