Using the real options approach,if the cost of future investments to capitalize on the R&D program is less than the returns from this investment,then
A) the program should be abandoned.
B) the program should be pursued.
C) further calculations should be made.
D) the exercise price should be determined.

Question

Quizplus · Accepted Answer

According to the real options approach, the potential returns from an R&D program should be evaluated based on the expected future cash flows. If the cost of future investments is less than the expected returns, it indicates that there is a positive net present value (NPV) for the project. Therefore, the program should be pursued as the potential return is greater than the cost of investment.

Using the Real Options Approach,if the Cost of Future Investments