For question 1. the fill in the blank options are: increase/decrease

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 availe for the project. Real options the value of capital investment projects. Which type of real option allows the inputs in the production process to be altered if market conditions change during a project's life? A shutdown option An investment timing option An input flexibility option An abandonment option Real option analysis adds value to a project when it is used for which of the following? Check all that apply. Making managers aware of the consequences of their decisions and actions on the creation or destruction of value for a capital project Identifying real options that can be sold in the financial markets Modifying the way that decision makers perceive flexibility in capital budgeting activities Making changes to the capital budget before it is started and financed