This chapter discusses the different types of real options, how to analyze them, and calculate the value of each option. A _____________ option is an investment that creates the opportunity to make other potentially profitable investments that would not otherwise be possible. A ___________ option gives the firm the ability to shut down a project if operating cash flows turn out to be lower than expected. An investment _______________ option gives the firm flexibility as to when to begin a project. Often, if a firm can delay an investment, it can increase a projects expected NPV. A ________________ option gives the firm the ability to alter operations depending on how conditions change during a projects life. These options can permit the firm to change either the inputs it uses or the output it produces after operations have commenced.

1. Flexibility/ Abandonment/ Growth/ Timing

2.Flexibility/ Abandonment/ Growth/ Timing

3. Flexibility/ Abandonment/ Growth/ Timing

4. Flexibility/ Abandonment/ Growth/ Timing