A firm's option to abandon a venture is an example of a:
A)bootstrapping option
B)financial option
C)survival option
D)real option

Question

Quizplus · Accepted Answer

The firm's option to abandon a venture is an example of a real option. Real options refer to the opportunities that a firm has to make decisions about a project based on new information as the project progresses. Abandoning a venture is one such decision, and it demonstrates that the firm has the flexibility to modify its investment strategy based on current circumstances. Real options allow the company to make investment decisions that are more strategic, based on a range of possible future outcomes rather than just today's facts.

A Firm's Option to Abandon a Venture Is an Example