Statements about real options

Reference no: EM131015536

Please explain why chose what you choose.

Which of the following statements about real options is false?

A. The more volatile the underlying source of risk, the more valuable the option.

B. In general, the longer before a real option must be exercised, the more valuable it is.

C. If interest rates fall, the values of real options will increase.

D. Real options often add considerable value to projects, so ignoring them could lead to downward-biased NPVs and systematic underinvestment.

E. While sometimes it is not possible to quantify the value of a project with real options, managers should still think about real options in the framework of this equation: True NPV = NPV without options + NPV of options.

Reference no: EM131015536

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