1. Valuing real options Aa Aa Real options give the holder the right, but not the obligation, to undertake business decisions-typically those that involve capital investments. Real options exist when which of the following occurs? 0 when a project produces foreign-denominated cash flows O When you can repeat a project multiple times when you can sell a predetermined number of shares of stock in the future O When managerial actions can alter a project's cash flow stream and, hence, its value True or False: The presence of managerial, or real, options decreases the value of an investment project. False rue Which of the following statements is most accurate about real options? O Real options restrict managers to waiting before deciding on making an investment in a project Real options always give managers the flexibility to decide to either invest in a project or wait to make a more calculated decision at a later date. Real options do not give managers the flexibility to decide to either invest in a project or wait to make a more calculated decision at a later date. Real options can give managers the flexibility to decide to either invest in a project or wait to make a more calculated decision at a later date. Different methods are used to look for real options and valuing them. The following table lists five possible methods Select their order of simplicity with 1 being the most simple procedure and 5 being the most difficult procedure Technique 2 3 4 5 Use a standard model for a financial option Use decision-tree analysis Develop a unique, project-specific model by using financial engineering techniques Use discounted cash flow valuation and include a qualitative recognition of any real option's value Use discounted cash flow valuation and ignore any real options by assuming their values are zero