Podcast
Questions and Answers
What is a key characteristic of the real option approach in investment decision-making?
What is a key characteristic of the real option approach in investment decision-making?
- Passive interference of management
- Active interference of management (correct)
- Ignoring future volatility in investment decisions
- Lack of flexibility in investment decisions
What is a key benefit of incorporating real options in investment projects?
What is a key benefit of incorporating real options in investment projects?
- Reducing shareholder value
- Generating higher shareholder value (correct)
- Increasing investment costs
- Decreasing flexibility in investment decisions
What type of real option can be executed exactly at the expiry date?
What type of real option can be executed exactly at the expiry date?
- Flexible facility option
- American option
- European option (correct)
- R&D investment option
What is an example of a real option in the context of production?
What is an example of a real option in the context of production?
What is a key feature of a real option that generates value?
What is a key feature of a real option that generates value?
What is a key characteristic of real options in the context of investment decision-making?
What is a key characteristic of real options in the context of investment decision-making?
What is the primary reason why the time value of a real option increases as the time to expiry date increases?
What is the primary reason why the time value of a real option increases as the time to expiry date increases?
What is the total value of a real option comprised of?
What is the total value of a real option comprised of?
In the example of the pharmaceutical company, what was the value of the option to alter the operating scale of the project?
In the example of the pharmaceutical company, what was the value of the option to alter the operating scale of the project?
What type of option is the option to stage the project in the example of the pharmaceutical company?
What type of option is the option to stage the project in the example of the pharmaceutical company?
What was the NPV of the project without the inclusion of the real option in the example of the pharmaceutical company?
What was the NPV of the project without the inclusion of the real option in the example of the pharmaceutical company?
What is the purpose of conducting real options analysis in a project?
What is the purpose of conducting real options analysis in a project?
What is a characteristic of the Stochastic binomial model?
What is a characteristic of the Stochastic binomial model?
Under what conditions is it worth considering real options?
Under what conditions is it worth considering real options?
What is the effect of increasing volatility on the internal value of a real option?
What is the effect of increasing volatility on the internal value of a real option?
What is an assumption of the Black-Scholes model?
What is an assumption of the Black-Scholes model?
What is the relationship between the rate of return of an asset and the risk-free rate in the context of real options?
What is the relationship between the rate of return of an asset and the risk-free rate in the context of real options?
What is a characteristic of the internal value of a real option?
What is a characteristic of the internal value of a real option?
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