Real options can have the effect of
A) increasing a project's NPV.
B) reducing a project's risk.
C) gaining information about future opportunities.
D) all of the above.

Question

Quizplus · Accepted Answer

Real options can increase a project's NPV by allowing flexibility and the ability to seize opportunities that become available. Real options can also reduce a project's risk by providing the ability to abandon or delay a project if market conditions change. Additionally, real options can allow for gaining information about future opportunities by creating a framework for analysis and highlighting areas of uncertainty. Therefore, all of the above options are possible effects of incorporating real options into a project analysis.

Real Options Can Have the Effect of