A Real Option Value is:
A) An option that been deflated by the cost of living index makes it a "real" option.
B) An opportunity cost of capital.
C) An opportunity to implement a new cost savings or revenue expansion activity that arises from business plans that the managers adopt.
D) An objective function and a decision rule that comes from it.
E) Both a and b.

Question

Quizplus · Accepted Answer

A Real Option Value refers to the value of having the flexibility to make decisions in the future, such as implementing new cost-saving measures or expanding revenue, based on the evolving business environment and plans. It does not relate to adjustments for cost of living (A) or represent an opportunity cost of capital (B), nor is it an objective function or decision rule (D).

A Real Option Value Is