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 and the obligation to buy, sell, or transform an asset at a set price during a specified period of time. O True False The managers of American Sporting Goods Inc. have included an expansion option into the design of a proposed capital investment project: I. This option allows the outputs of the production process to be altered if market conditions change during a project's life. II. This option allows a project to be expanded if demand turns out to be greater than expected. III. This option allows the inputs in the production process to be altered if market conditions change during a project's life. IV. This option allows a firm to temporarily terminate operations in order to prevent experiencing negative cash flows Which of the listed statements best describes an expansion option? Statement II Statement I Statement III Statement IV