The presence of managerial, or real, options the worth of an investment project.
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A. B. C. D.A
The presence of managerial, or real, options can affect the worth of an investment project. Real options refer to opportunities or flexibility that a firm has to change its operations, investments or strategic directions in response to changes in the market, industry or other external factors.
Real options are similar to financial options in that they provide the firm with the right, but not the obligation, to take a particular action in the future. Some examples of real options include the ability to expand or contract operations, the option to delay or accelerate investments, or the option to switch production between different products.
Real options can increase the worth of an investment project because they allow the firm to respond to changes in the market or industry environment in a more flexible and adaptive manner. This means that the firm can take advantage of positive changes or mitigate negative changes, which can improve the overall profitability of the project.
On the other hand, real options can also decrease the worth of an investment project if the cost of acquiring or maintaining the options outweighs the potential benefits. In other words, if the cost of acquiring an option is high and the potential benefits are low, the option may not be worth pursuing.
Therefore, the answer to the question depends on the specific circumstances of the investment project and the real options involved. It is possible that the presence of real options could increase, decrease, or have no effect on the worth of an investment project. Therefore, the correct answer to the question is D) Increases or decreases, depending on the specific circumstances.