The advantage of a real option investment is that a firm can ________ when the competitive environment shifts.
A) be the industry leader
B) preserve flexibility to be well positioned
C) be stronger financially
D) be positioned to neutralize threats from smaller firms

Question

Quizplus · Accepted Answer

Real options provide firms with the flexibility to adjust their investment decisions based on changing market conditions or competitive environments. This allows them to be better positioned to take advantage of opportunities or mitigate risks. Being able to preserve flexibility is a major advantage of real option investments, making option B the best choice. The other options may be potential outcomes of utilizing real options, but they do not directly address the advantage of flexibility.

The Advantage of a Real Option Investment Is That a Firm