Real options in capital budgeting can be classified. The classification that means that the project is delayed and can be termed "waiting to invest" is the ____ option.
A) investment timing
B) abandonment
C) shutdown
D) growth

Question

Quizplus · Accepted Answer

The investment timing option refers to the option to delay an investment in order to wait for more favorable conditions. This can include waiting for new technology to be developed, waiting for market conditions to improve, or waiting for competitors to exit the market. This option is often associated with real estate development or new product launches, where timing is crucial for success. The abandonment option refers to the option to abandon a project if it is not performing well. The shutdown option refers to the option to shut down a project if it becomes unprofitable. The growth option refers to the option to invest in a project that has the potential to generate more cash flow in the future.

Real Options in Capital Budgeting Can Be Classified