Define the concept of real options. Describe an instance in your professional life (current employer or past employer) where a real option could have been useful.© BrainMass Inc. brainmass.com October 25, 2018, 7:09 am ad1c9bdddf
The concept of a real option takes the economic conditions into consideration. When we use a real option, we adjust our operations strategies to match the state of the economy and other internal conditions. If we analyze a potential project and there is a positive net present value and we have the resources to successfully ...
Define the concept of real options. Describe an instance in your professional life (current employer or past employer) where a real option could have been useful.
Business questions: general decision rule for NPV, use of inflation when evaluating firms, NPV vs real options and more...
Answer the below questions with at least five sentences each, >>>thoroughly and in your own words<<<
? Present the general decision rule for NPV. If a project has NPV = 0, should a manager accept the project?
? Define purchasing power parity. What is the importance of purchasing power parity to an analyst attempting to establish value for a company located in an emerging market.
? Why might inflation pose more problems in evaluating foreign firms than in evaluating a domestic business?
? Discuss some examples of political risks facing firms that are investing in other parts of the world.
? Why might there be an advantage in being a minority investor in an emerging market as contrasted to majority ownership?
? Why might the cost of capital be higher in emerging markets than in domestic ones?
? How can you use financial futures markets to hedge such risks as foreign exchange risk?
? Discuss the difference between NPV (net present value) and real options.