A firm has a tract of timber.The future growth rate of the trees and the price of lumber are uncertain.The firm:
A) has an expansion option.
B) has an option to vary the production technology.
C) should harvest the timber immediately if NPV is positive.
D) has a timing option.

Question

Quizplus · Accepted Answer

The firm has a timing option because it can choose when to harvest the timber based on future growth rates and lumber prices, allowing it to optimize the timing of its investment.

A Firm Has a Tract of Timber