The Major Advantage of Real Option Theory Over the Decision

Multiple Choice

The major advantage of real option theory over the decision tree approach for analyzing land value and development decision making is:

A) Option theory is simpler and less prone to making mistakes.
B) Option theory allows a more detailed and realistic model of complex development staging and design alternatives.
C) Option theory is a complete economic model based on the concept of market equilibrium, and therefore does not require as much prior knowledge about the opportunity cost of capital discount rates or expected returns) .
D) Decision tree analysis does not allow for the time-to-build time required for construction) , and assumes that future values follow a normal or Gaussian) distribution with no autocorrelation "efficient markets assumption") .