Why must real options have positive value? (Select all the choices that apply.)

A. Real options must have positive value because they are only exercised when doing so would increase the value of the investment.

B. If exercising the real option would reduce value, managers can allow the option to go unexercised.

C. Real options must have positive value because they can always be sold to recover the initial investment.

D. Having the real option but not the obligation to act is valuable.

Question

Jaylah Ibarra

Business

14 January, 13:16

Why must real options have positive value? (Select all the choices that apply.)

A. Real options must have positive value because they are only exercised when doing so would increase the value of the investment.

B. If exercising the real option would reduce value, managers can allow the option to go unexercised.

C. Real options must have positive value because they can always be sold to recover the initial investment.

D. Having the real option but not the obligation to act is valuable.

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Answers (1)

Know the Answer?

Elisha Giles · Answer 1

A. Real options must have positive value becasue they are only exercised when doing so would increase the value of the investment.

B. If exercisung the real option would reduce value, managers ca allow the option to go unexercised.

D, Having the real option but not the obligation to act is valuabale.

Explanation:

Because real option are options or choices made available to managers of a firm concerning investment their choices are meant to bring about a positive growth and return on the investments.

So if any of the choices presented to these managers are going to reduce the values or have other negative impacts on the investment and its value, then the option which is the real option or ideal option canbe forgone.

Cheers.