Real options are generally worth more than their expected NPV impact due to the effect real options have on risk.

Question

Quizplus · Accepted Answer

Real options allow for flexibility and strategic decision-making in uncertain situations, reducing the overall risk of a project or investment. This added value from risk reduction is not captured in the expected NPV calculation, making real options worth more than their expected impact on cash flows.

Real Options Are Generally Worth More Than Their Expected NPV