Question

True or False: A real option embedded in a capital project gives the investing firm the right but not the obligation to buy, sell, or transfer an asset at a set price during a specified period of time.

Answer 1

Answer: True

Explanation: Real options references projects that involves tangible assets, assets of a physical nature and are choices that are available to the management of a firm regarding business investment opportunities. Thru are discretionary investment opportunities 'embedded' in a capital project and confers on its holder the right, but not the obligation, to buy, sell, or otherwise transform, transfer an asset at a set price during a specified time period.

Answer 2

Answer:

True

Explanation:

Real options are choices a company's management makes to expand, change, or curtail projects based on changing economic, technological, or market conditions. ... Using real options value analysis (ROV), managers can estimate the opportunity cost of continuing or abandoning a project and make decisions accordingly.