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

Question

Quizplus · Accepted Answer

Real options refer to the flexibility that a company has to change its plans in response to changing market conditions, and they include the option to expand or abandon a project, to wait and learn before investing, and to vary the mix of output or production methods. Therefore, option D includes all the examples of real options listed in the question.

Which of the Following Are Examples of Real Options