Which of the following is true about investment in research and development? A)

Question

Which of the following is true about investment in research and development?

A) The option side of R&D investments is not related to real options. B) Companies are unable to increase or decrease resources committed to a project based on how

successful it has been. C) Distant payoffs from R&D investments are more uncertain than other investments. D) In the pharmaceutical industry, R&D projects are not regarded as important strategic

investments. E) R&D investments are never staged.

Explanation / Answer

In this query, option C is correct.

When you talk about Rn D investments, it means either there is a new product is emerging or any add on is given to the existing one. So this is an uncertain projection, either it can be accepted or rejected. While the investment made in existing products or in financial market is much more efficient as we can forecast and evaluate the various scenarios. In case of Rn D its difficult to make the projections of the returns on what we have invested. however R n D investments plays a crucial role in expansion of the market.

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