Question

Name three types of real options available to managers with regard to projects and briefly describe them in a sentence or two

Answer 1

Real options are the investment options which are to be exercised or not to be exercised by different managers in relation to different projects.

Three example of real option will be as follows-

(A)an option to an investment manager to either expand the business or wait for the expansion or defer the expansion or abandon the project is an example of real option related to investment decisions.

(B)managers have also have the dilemma whether to invest into financial instrument or whether to invest into the intangible assets so, it is decided through a real option

(C)the option of management in order to switch from one project to another project is another form of real option and it will help the management in choosing the best project through switching method.