True or False: A real option embedded in a capital project gives the investing f

Question

True or False: A real option embedded in a capital project gives the investing firm the right and the obligation to buy, sell, or transform an asset at a set price during a specified period of time. False True The managers of Aberdeen Petroleum Refiners Corp. have Included an Input flexibility option Into the design of a proposed capital Investment project: This option allows a firm to temporarily terminate operations in order to prevent experiencing negative cash flows This option allows a firm to postpone a project until it can gather more information or market conditions change. This option allows a firm to shut down a project if its cash flows are lower than expected. This option allows the inputs in the production process to be altered if market conditions change during a project's life. Which of the listed statements best describes an input flexibility option? Statement IV Statement I Statement II Statement III None of the statements listed above describes an Input flexibility option. Real option analysis adds value to a project when it is used for which of the following? Check all that apply. Identifying real options that can be sold In the financial markets Making changes to the capital budget before it is started and financed increasing the riskiness of the capital project and decreasing the project's cash flows Modifying the way that decision makers perceive flexibility in capital budgeting activities

Explanation / Answer

The statement is true as this option allows a firm to postpone a project untill it can gather more information or market conditions changes.

this characteristic is the flrxibility and modifying the way that the decision makers can avail is the flexibility of the process of capital budgeting.

hence, the correct option is true.

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