If a firm has the option of investing in R&D,the cost of commercializing a new technology that is developed can be considered the:
A) exercise price.
B) price of a call option.
C) benefit of exercising the option.
D) the value of the option.

Question

Quizplus · Accepted Answer

The cost of commercializing a new technology that is developed can be considered the exercise price in the context of real options. This is because it represents the cost that the firm must "pay" to exercise the option of implementing the new technology, similar to the exercise price in a financial call option.

If a Firm Has the Option of Investing in R&D,the