Real options are an important tool for thinking about strategic decisions under uncertainty, however, quantitative techniques designed to value financial options (e.g. the Black-Scholes option pricing model) cannot be applied to real options. [See p.57]

Group of answer choices

True

False

Since the long term is a series of short terms, short term profit maximization will always lead to long term profit maximization. [See pp.48-49]

Group of answer choices

True

False

According to Milton Friedman, the social purpose of a business is to make profit. [See p.51]

Group of answer choices

True

False

Basing management decisions on economic profit (e.g. Economic Value Added) rather than accounting profit is more important for companies with few fixed assets (such as software companies and consulting firms) than capital-intensive companies such as chemical companies and vehicle manufacturers. [See p.41]

Group of answer choices

True

False

Every business enterprise has a distinct purpose; however, common to all businesses is the goal of: [See p.37]

Group of answer choices

Making customers satisfied.

Creating value.

Satisfying stakeholders.

Maximizing shareholder value.

For a value for the firm requires that a firm: [See p.37]

Group of answer choices

Earns profits for shareholders, then uses these profits to satisfy the interests of other stakeholders.

Creates customer loyalty, that can then be converted into profit through increasing prices.

Creates value for customers, then appropriate some of that value as profit.

Creates value for employees through attractive pay, benefits, and working conditions, then relying upon employees to drive customer satisfaction and, eventually, profits.

Maximizing enterprise value and maximizing shareholder value are closely linked because: [See p.40]

Group of answer choices

Enterprise value and shareholder value are the same thing

Shareholder value is calculated by adding debt and other non-equity financial claims to the DCF value of the firm

Shareholder value is calculated by subtracting debt and other non-equity financial claims from the enterprise value of the firm

It is obvious that they must be linked

The balanced scorecard is primarily a tool for implementing the stakeholder view of the firm. [See p.48]

Group of answer choices

True

False

Viewing strategy as a portfolio of options rather than a portfolio of investments relies upon the rationale that: [See pp.55-56]

Group of answer choices

Uncertainty means that flexibility is valuable

Committing to a long-term program of investment can be disastrous if circumstances change

Most investment projects can be divided into a sequence of stages where, at any point of time, it is only necessary to decide the next stage

All of these