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 decision-tree analysis Use discounted cash flow valuation and ignore any real options by assuming their values are zero. Develop a unique, project-specific model by using financia engineering techniques Use a standard model for a financial option. Use discounted cash flow valuation and include a qualitative recognition of any real option's value. O O O 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? When you can sell a predetermined number of shares of stock in the future When managerial actions can alter a project's cash flow stream and, hence, its value When a project produces foreign-denominated cash flows O When you can repeat a project multiple times True or False: The presence of managerial, or real, options decreases the value of an investment project. False O True