Which of the following are examples of real options?
I.the option to expand if an investment project succeeds;
II.the option to wait (and learn)before investing;
III.the option to shrink or abandon a project;
IV.the option to vary the mix of output or the firm's production methods
A)I only
B)I and II only
C)I, II, and III only
D)I, II, III, and IV

Question

Quizplus · Accepted Answer

All four options are examples of real options. The option to expand is a growth option, the option to wait is a learning option, the option to shrink or abandon is an abandonment option, and the option to vary output or production methods is a flexibility option. All of these options provide value to a company by allowing it to make strategic decisions based on future uncertainties.

Which of the Following Are Examples of Real Options