The timing option that gives the option to wait: I. may be of minimal value if the project relates to a rapidly changing technology.
II) is partially dependent upon the discount rate applied to the project being evaluated.
III) is defined as the situation where operations are shut down for a period of time.
IV) has a value equal to the net present value of the project if it is started today versus the net present value if it is started at some later date.
A) I and III only
B) II and IV only
C) I and II only
D) II, III, and IV only
E) I, II, and IV only

Question

Quizplus · Accepted Answer

The timing option to wait is less valuable in rapidly changing technology (I) and is influenced by the discount rate (II). It is valued by comparing the NPV of starting today versus later (IV).

The Timing Option That Gives the Option to Wait: I