The following are practical challenges in applying real-options analysis:
A)Real options can be complex.
B)Real options can be complex, and the real options problems may not be well structured.
C)Competition may reduce or change the value of real options.
D)Real options can be complex, the real options problems may not be well structured, and competition may reduce or change the value of real options.

Question

Quizplus · Accepted Answer

Real options analysis is a complex technique that requires a high level of expertise to apply. Real options problems may not be structured, and it may be hard to identify the value of the options in dynamic and uncertain situations. Lastly, competition is crucial when it comes to real options, and the entry of new competitors may change the value of real options, making it difficult to make rational investment decisions. Therefore, all the options must be considered when applying real-options analysis.

The Following Are Practical Challenges in Applying Real-Options Analysis