Question 1

The five drivers of call option value are the value of the underlying asset,cost of exercise,risk-free rate,time to investment and volatility.

Accepted Answer

A) True 
 B)False

Question 2

Real options analysis offers a means of qualitatively evaluating the role of uncertainty in firms' investment decisions.

Accepted Answer

A) True 
 B)False

Question 3

The key strength of capital budgeting is that the tools are designed to value passive investments without flexibility.

Accepted Answer

A) True 
 B)False

Question 4

Black-Scholes assumes that the exercise price is:

Accepted Answer

A)  known and constant. 
B)  unknown. 
C)  variable. 
D)  known and variable. 
A)  known and constant. 
B)  unknown. 
C)  variable. 
D)  known and variable.

Question 5

Firms seeking value from real options require ____ and ____ that enable them to implement flexible strategies effectively.

Accepted Answer

A)  leadership;systems 
B)  organizations;leadership 
C)  organizations;systems 
D)  organizations;management 
A)  leadership;systems 
B)  organizations;leadership 
C)  organizations;systems 
D)  organizations;management

Question 6

Discuss the value drivers for real options.

Accepted Answer

The value of real options is driven by f

Question 7

Abandonment options provide firms flexibility by allowing them to:

Accepted Answer

A)  confer multiple options that are built upon one another. 
B)  exit deteriorating competitive situations. 
C)  combine features of various options. 
D)  combine irreversibility and uncertainty. 
A)  confer multiple options that are built upon one another. 
B)  exit deteriorating competitive situations. 
C)  combine features of various options. 
D)  combine irreversibility and uncertainty.

Question 8

The value of real options is driven by five factors.Which of the following is NOT one of these factors?

Accepted Answer

A)  cost of exercise 
B)  risk-free rate 
C)  volatility 
D)  future commitment 
A)  cost of exercise 
B)  risk-free rate 
C)  volatility 
D)  future commitment

Question 9

Critics of real options analysis suggest that it is overly technical and beyond the mathematical competence of many managers.

Accepted Answer

A) True 
 B)False

Question 10

A strategy can be said to be flexible when it can be changed by all parties involved without negative consequences.

Accepted Answer

A) True 
 B)False

Question 11

When Joe's Computers made the decision to sell some of its equipment through the resale market,it was exercising the option to defer.

Accepted Answer

A) True 
 B)False

Question 12

For real options,the current value of an underlying asset is equivalent to the current price of a stock.

Accepted Answer

A) True 
 B)False

Question 13

The key to constructing a(n) ____ is to work backwards to calculate the value of the option at each node.

Accepted Answer

A)  Black-Scholes analysis 
B)  "up" or "down" movement 
C)  binomial tree 
D)  decision tree 
A)  Black-Scholes analysis 
B)  "up" or "down" movement 
C)  binomial tree 
D)  decision tree

The five drivers of call option value are the value of the underlying asset,cost of exercise,risk-free rate,time to investment and volatility.

Real options analysis offers a means of qualitatively evaluating the role of uncertainty in firms' investment decisions.

The key strength of capital budgeting is that the tools are designed to value passive investments without flexibility.

Black-Scholes assumes that the exercise price is:

Firms seeking value from real options require and that enable them to implement flexible strategies effectively.

Discuss the value drivers for real options.

Abandonment options provide firms flexibility by allowing them to:

The value of real options is driven by five factors.Which of the following is NOT one of these factors?

Critics of real options analysis suggest that it is overly technical and beyond the mathematical competence of many managers.

A strategy can be said to be flexible when it can be changed by all parties involved without negative consequences.

When Joe's Computers made the decision to sell some of its equipment through the resale market,it was exercising the option to defer.

For real options,the current value of an underlying asset is equivalent to the current price of a stock.

The key to constructing a(n) ____ is to work backwards to calculate the value of the option at each node.

Introduction to Strategic Management

Strategic Leadership

The External Environment: Opportunities, threats, industry Competition, and Competitor Analysis

The Internal Organization: Resources, capabilities, and Core Competencies

Business-Level Strategy

Competitive Rivalry and Competitive Dynamics

Cooperative Strategy

Corporate-Level Strategy

Acquisition and Restructuring Strategies

International Strategy

Corporate Governance

Strategic Entrepreneurship

Filters

Exam 13: Strategic Flexibility and Real Options Analysis

The five drivers of call option value are the value of the underlying asset,cost of exercise,risk-free rate,time to investment and volatility.

Real options analysis offers a means of qualitatively evaluating the role of uncertainty in firms' investment decisions.

The key strength of capital budgeting is that the tools are designed to value passive investments without flexibility.

Black-Scholes assumes that the exercise price is:

Firms seeking value from real options require ____ and ____ that enable them to implement flexible strategies effectively.

Discuss the value drivers for real options.

Abandonment options provide firms flexibility by allowing them to:

The value of real options is driven by five factors.Which of the following is NOT one of these factors?

Critics of real options analysis suggest that it is overly technical and beyond the mathematical competence of many managers.

A strategy can be said to be flexible when it can be changed by all parties involved without negative consequences.

When Joe's Computers made the decision to sell some of its equipment through the resale market,it was exercising the option to defer.

For real options,the current value of an underlying asset is equivalent to the current price of a stock.

The key to constructing a(n) ____ is to work backwards to calculate the value of the option at each node.

Introduction to Strategic Management

Strategic Leadership

The External Environment: Opportunities, threats, industry Competition, and Competitor Analysis

The Internal Organization: Resources, capabilities, and Core Competencies

Business-Level Strategy

Competitive Rivalry and Competitive Dynamics

Cooperative Strategy

Corporate-Level Strategy

Acquisition and Restructuring Strategies

International Strategy

Corporate Governance

Strategic Entrepreneurship

Filters

Firms seeking value from real options require and that enable them to implement flexible strategies effectively.