The estimated value of a real option:
A) Is affected by essentially the same set of factors that affect the value of financial options.
B) Cannot be incorporated into a conventional DCF analysis of an investment project.
C) Is affected by the length of the expiration date of the option.
D) Decreases as the underlying risk of a project increases.
E) Is inversely related to estimated volatility of returns for a proposed project.

Question

Quizplus · Accepted Answer

The Answer of The estimated value of a real option:
A) Is affected by essentially the same set of factors that affect the value of financial options.
B) Cannot be incorporated into a conventional DCF analysis of an investment project.
C) Is affected by the length of the expiration date of the option.
D) Decreases as the underlying risk of a project increases.
E) Is inversely related to estimated volatility of returns for a proposed project.

The Estimated Value of a Real Option