After studying Chapter 14, you should be able to:
- Define the riskiness of a capital investment project.
- Understand how cash-flow riskiness for a particular period is measured, including the concepts of expected value, standard deviation, and coefficient of variation.
- Describe methods for assessing total project risk, including a probability approach and a simulation approach.
- Judge projects with respect to their contribution to total firm risk (a firm-portfolio approach).
- Understand how the presence of managerial (real) options enhances the worth of an investment project.
- List, discuss, and value different types of managerial (real) options.