Arctic Inc. has built a highly interactive operating system for mobile and other electronic gadgets. The development cost to the company was high but the system was inexpensive to sustain and market. The NPV of this project was negative. However, in the coming years the company plans to launch mobile phones, portable audio and video devices. The decision of launching the operating system for mobile and other devices is an example of:

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The decision to launch the operating system for mobile and other devices is an example of an option to make follow-on investments. Despite the negative NPV of the initial project, the company sees potential in using the operating system for future products and is willing to invest in it. This option allows the company to adapt to changing circumstances and take advantage of new opportunities.