Real options increase the value of capital investment projects.

Which of the list statement best describes an abandonment option?

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 avalable for the project. Real options the value of capital investment projects. The managers of Amalgamated football League inc, have included an abandonment option into the design of a proposed capital investment project: 1. This option allows a firm to shut down a project if its cash flows are lower than expected. 11. 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. rV. 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? Statement I Statement II Staternent III Statement V 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. Making managerial decision making less deliberate and analytical Making managers aware of the consequences of their decisions and actions on the creation or destruction of value for a capital project Making changes to the capital budget before it is started and financed Identifying real options that can be sold in the financiat markets