Real options are priced in a similar way like stock options which is called real option valuation (ROV). Peterson and Fabozzi (2002: 153) list five factors that are important in the valuation of a stock option. Then, they list the real option correspondent of each factor as follows.

1. Effect of stock’s price in stock options is the effect of the present value of cash flows from the investment opportunity in real options.
2. Effect of the exercise (strike) price of the option in stock options is the effect of the present value of the delayed capital expenditure of future cost savings in real options.
3. Effect of the risk-free interest rate in stock options is the same risk-free interest rate in real options.
4. Effect of the volatility of stock’s price in stock options is uncertainty of the project’s cash flows in real options.
5. Effect of the time remaining to the expiration of the option in stock options is the effect of the project’s useful life in real options.

The correct answer is D.