9. Real options Aa Aa Projects are also often embedded with different options that can help making decisions under uncertainty. There are techniques used to evaluate these embedded options which are called real options. The models used to value these options are based on the type of the real option available for the project. True or False: A real option embedded in a capital project gives the investing firm the right but not the obligation to buy, sell, or transform an asset at a set price during a specified period of time. True O False The managers of American Sporting Goods Inc. have included an abandonment option into the design of a proposed capital investment project I. This option allows a firm to shut down a project if its cash flows are lower than expected II. This option allows a project to be expanded if demand turns out to be greater than expected III. This option allows the outputs of the production process to be altered if market conditions change during a project's life IV. This option allows a firm to postpone a project until it can gather more information or market conditions change Which of the listed statements best describes an abandonment option? O Statement I Statement II O Statement III O Statement IV None of the statements listed above describes an abandonment option. Real option analysis adds value to a project when it is used for which of the following? Check all that apply Expanding the way that managers view risk and uncertainty, seeing them as phenomena to be appreciated and exploited rather than feared and avoided Making managers aware of the consequences of their decisions and actions on the creation or destruction of value for a capital project Modifying the way that decision makers perceive flexibility in capital budgeting activities Making changes to the capital budget before it is started and financed