Sometimes real options can give managers the flexibility to decide to invest in a project or wait to make a more calculated decision.

True or False: The preceding statement is correct.

True

False

Which type of real option allows a project to be expanded if demand turns out to be greater than expected?

Investment timing option

Growth option

Abandonment option

Flexibility option

Consider the following example:

Smoltz Motors has plants around the country that specialize in specific models of cars. Smoltz has determined that lower demand has led the firm's inventory of SUVs to be too high. Smoltz wants to stop production for its SUVs and focus on its sedans.

This example describes a real option to abandon or expand?.