An example of a real option is:
A)the option to make follow-on investments.
B)the option to abandon a project.
C)the option to wait before investing.
D)all of the options.

Question

Quizplus · Accepted Answer

All the options listed (the option to make follow-on investments, the option to abandon a project, and the option to wait before investing) are real options. Real options are the flexibility or rights to make certain business decisions in the future, which can have an impact on a project's value. The ability to wait and see how a project develops before making a decision or to change course mid-project can be valuable options. Similarly, the ability to invest more in a successful project or to abandon a failing project can also be valuable options. Therefore, all of the options are examples of real options.

An Example of a Real Option Is