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10. Introduction to real options Consider the following statement about real options: Decision tree analysis is more commonly used in valuing securities than real assets.

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10. Introduction to real options Consider the following statement about real options: Decision tree analysis is more commonly used in valuing securities than real assets. True or False: The preceding statement is correct. True False which type of real option allows a firm to postpone a project until it can gather more information? Abandonment option Flexibility option Growth option Investment timing option Consider the following example: Clemens Inc. is considering a $100 million Investment in a new line of soft drinks. However, $100 million is a huge investment for Clemens; if things torn bad, it could wipe out the company. A few senior managers have suggested a smaller investment of $20 million to see if the market is as strong as they hope it is. If demand is strong and the opportunity is still available, Clemens will increase its Investment at a later date This example describes a real option to

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