Answered: What is managerial options?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter1: Accounting As A Tool For Managers

Section: Chapter Questions

Problem 6Q: What is the purpose of management accounting?

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Question

What is managerial options?

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Step 1

Introduction:

Capital budgeting is an investment criterion or decision making mechanism for determining which project a firm will choose to make an investment to help the business expand.

Step 2

Answer:

The managerial option is characterized as the capability of the management to take decisions on the basis of various options available to them that will have an impact on the project’s cash flows, existence or the approval in future. It is often referred to as real options. They are important because it increases the total worth or valuation of the investment project taken up in the decision-making.

It is also expressed in the following equation,

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