Real options are most valuable when the underlying source of risk--such as uncertainty about unit sales, or the sales price, or input costs--is low.

Question

Quizplus · Accepted Answer

Real options are most valuable when the underlying source of risk is high, as they allow the company to delay or abandon a project if the future cash flows turn out to be unfavorable. Low uncertainty means that the company can make more accurate predictions about the future and may not need to exercise real options.

Real Options Are Most Valuable When the Underlying Source of Risk--Such