ROPMs (real options pricing models)value information systems similar to stock options,in that
A)ROPMs can be bought and sold like stocks.
B)a company's worth can be evaluated by the worth of their ROPMs.
C)initial expenditures on IT projects are seen as creating the right to pursue and obtain benefits from the system at a later date.
D)expenditures and benefits from IT projects are seen as inflows and outflows of cash that can be treated themselves like options.
E)the price paid today for information systems reflects their future cash flows.

Question

Quizplus · Accepted Answer

ROPMs treat initial IT project expenditures as creating the right to pursue and obtain benefits from the system at a later date, similar to stock options. The value of the system is based on its potential future benefits, which may be uncertain and change over time, like stock options. However, ROPMs cannot be bought and sold like stocks, and the worth of a company is not solely evaluated based on their ROPMs. The expenditures and benefits from IT projects can be treated as inflows and outflows of cash, but this is not unique to ROPMs. The price paid for information systems reflects their future cash flows, but this is also not unique to ROPMs.

ROPMs (Real Options Pricing Models)value Information Systems Similar to Stock