MNG Satisfaction review Exam Question And Answers Verified Solution Save

E - ANSWERS________ is when both market uncertainty and technical uncertainty are high. A. Real options thinking B. Market uncertainty C. Scouting options D. Positioning options E. Stepping-stone options D - ANSWERSWhich of the following is NOT considered a real asset? A. Finished goods inventories B. Information technology C. Distribution systems D. Patents E. Land C - ANSWERSWhich of the following is NOT true about types of flexibilities that an organization may possess? A. Actions a firm takes can create more than one type of flexibility simultaneously. B. The option to abandon is when a firm makes choices that enhance its ability to close and restart a business. C. The option to expand is when a firm makes choices that enhance its ability to enhance its strategy beyond its current boundaries. D. Strategic flexibility created by a firm having options can take many forms, not just one. E. A firm that builds a plant that is very difficult to increase in capacity is less flexible than this firm. This is why the option to grow is often attractive to a firm. D - ANSWERSWhen the real options that a company confronts are ________, or when the ability to do real options analysis is widely diffused among competing firms, real options analysis is ________ to be a source of competitive advantage for a firm. A. not path dependent; likely B. flexible; not likely C. not flexible; not likely D. not path dependent; not likely E. path dependent; not likely D - ANSWERSWhich of the following describes the time to maturity for an option? A. The longer the time to maturity, the greater is the uncertainty of a real option. B. The longer the time to maturity, the higher reward of that option. C. The shorter the time to maturity, the greater is the value of a real option. D. The longer the time to maturity, the greater is the value of a real option. E. The shorter the time to maturity, the greater is the uncertainty of a real option. E - ANSWERSThe ________ of cash flows generated by choosing and implementing a certain strategy is equal to the sum of those cash flows, discounted by how risky they are. A. real option B. risk C. strategic flexibility D. real assets E. present value E - ANSWERS________ is step six in valuing a real option. A. Calculating option value metrics B. Describing the real option using financial option parameters C. Recognizing the real option D. Estimating the value of the option from the Black-Scholes option pricing table E. Comparing full present value with option value E - ANSWERSWhen competing companies are all contemplating the same uncertain strategic decision and all value the flexibility and options in a similar way, the actions taken because of the analysis will ________. A. create greater profitability B. very unequal competitiveness C. a greater expense ratio D. only create a more hostile competitive environment E. only be a source of competitive parity B - ANSWERSWhich of the following is FALSE about real options? A. The lower the cost of exercising a real option (X), the greater is the value of that real option. B. The higher the cash flows generated by exercising a real option, the lower is the value of that real option. C. The greater the uncertainty, the more valuable a real option is. D. The higher the risk-free interest rate, the more valuable the option is. E. The longer the time to maturity, the more valuable a real option is. E - ANSWERS________ is step two in valuing a real option. A. Calculating option value metrics B. Estimating the value of the option from the Black-Scholes option pricing table C. Comparing full present value with option value D. Recognizing the real option E. Describing the real option using financial option parameters E - ANSWERSWhich of the following describes the exercise price of an option? A. The lower the exercise price, the greater the incentive to purchase the option. B. The higher the exercise price, the greater is the value of a real option. C. The higher the exercise price, the less risk the option contains. D. The lower the exercise price, the greater is the market value of the stock share. E. The lower the exercise price, the greater is the value of a real option. C - ANSWERSWhich of the following is true? A. Exchanges characterized by high uncertainty are less likely to be managed through various forms of strategic alliances than be vertically integrated. B. Firms seeking to implement a strategy of stability under conditions of uncertainty should adopt flexible forms of organization. C. Firms seeking to implement a strategy of flexibility under conditions of uncertainty should adopt flexible forms of organization. D. The U-form structure and associated control and compensation policies of a company can provide extensive flexibility for the company. E. Vertically integrating a firm into an exchange is generally more flexible and costlier to change than using market contracts. E - ANSWERSIn order for a company to have strategic flexibility, it must possess __________. A. real options B. options to grow C. options to defer D. real assets E. strategic options B - ANSWERSUnder conditions of low market uncertainty and low technical uncertainty, when a company invests in new products and services, it has ________. A. a limited resource base B. limited real option value C. great potential for profitability D. limited market options E. high real option value A - ANSWERSUsing ________ does not work under conditions of ________. A. present value analysis; uncertainty B. the Black-Scholes model; risk C. present value analysis; certainty D. risk analysis; uncertainty E. the Black-Scholes model; certainty A - ANSWERSUnder conditions of high uncertainty for a company, what is often valuable since it can create real options for the firm? A. flexibility B. risk C. compromise D. consistency E. stability A - ANSWERS________ is step one in valuing a real option. A. Recognizing the real option B. Comparing full present value with option value C. Calculating option value metrics D. Estimating the value of the option from the Black-Scholes option pricing table E. Describing the real option using financial option parameters B - ANSWERSWhen is the economic value from a real option realized by a firm? A. When the market value of the stock price is more than the option price B. When the cash flows generated from exercising options are greater than the cost of exercising them C. When the market value of the stock price is less than the option price D. When the cash flows generated from exercising options are less than the cost of exercising them E. When the cash flows generated from exercising options equals the cost of exercising them B - ANSWERSWhen a company builds a factory with the ability to add capacity at some future point at a low cost, it is an example of the option to ________. A. contract B. grow C. defer D. abandon E. expand D - ANSWERSWhich of the following is NOT one of the factors for valuing financial options in the Black Scholes model? A. The risk-free rate of return B. The cash flows created by exercising an option C. The time for an option to mature D. The riskiness of the option E. The exercise price of an option D - ANSWERSMcGrath and MacMillan argue that ________. A. under conditions of more certainty, top managements should focus on flexibility and diversity in projects B. with certainty, profit is more assured C. with high levels of uncertainty, top management should invest primarily invest on just one or two focused projects D. under conditions of uncertainty, managers should diversify E. with stability in the economy, managers should diversity in their project choices D - ANSWERSThe concepts of flexibility and real options are closely related to the importance of ________. A. history and path independence B. risk and stability C. risk and path dependence D. history and path dependence E. stability and consistency D - ANSWERSProgressive Insurance's use of "Flo" as its primary advertising spokesperson in the U.S. market with additional alternative approaches is an example of __________. A. real assets B. strategic options C. real options D. strategic flexibility E. present value A - ANSWERS________ is when market uncertainty is high and technical uncertainty is low. A. Scouting options B. Stepping-stone options C. Real options thinking D. Positioning options E. Flexibility D - ANSWERS________ is when technical uncertainty is high and market uncertainty is low. A. Stepping-stone options B. Technical uncertainty C. Scouting options D. Positioning options E. Market uncertainty