Which of the following is NOT an example of a real option when evaluating a project?

	A.	Deciding to stop the project after the first year if sales are less than expected.
	B.	Deciding to include positive externalities in the initial business case.
	C.	Deciding to delay the expansion of the project into a new geography after the first year.
	D.	Temporarily halting the project after the second year due to Covid.
	E.	All of the above are examples of real options.

Why should management consider real options when evaluating a project?

	A.	By considering real option in a business case, the cash flows in years 0 and 1 are increased.
	B.	The results of taking an action after the project has started can change the expected NPV if things go poorly, thus reducing the risk of the project.
	C.	Real options provde the manager with better base case results, and this needs to be considered.
	D.	All of the above are good reasons for considering real options.

Good managers always estimate correctly in business cases.

True

False

Markets always respond the way managers expect them to.

True

False