Which of the following statements about "real options" is true?
A)The existence of a real option may either increase or decrease the value of the project..
B)The existence of a real option can lower the cost of capital associated with a project.
C)Real options are very rare in practice.
D)The existence of a real option may change the magnitude, but not the uncertainty, underlying expected future cash flows from the project.

Question

Quizplus · Accepted Answer

Real options can provide management with the flexibility to adapt and make decisions that can potentially lower the risk and, consequently, the cost of capital associated with a project.

Which of the Following Statements About "Real Options" Is True