Question

Real Options Give two examples of “real options” that you have come across in your professional life, or that may come up in projects in a business you wish to start, or that may come up in the projects at a company in which you hope to be employed.

Answer 1

I have come across two type of option decisions:

1. Option to expand.

2.option to abandon.

Option to expand:

In my professional life ,A client who is doing some xyz business is operating with good profits and by future evaluation came to known that the profits also will continue or increased in future.By observing this type the shareholders also will also invest in huge,by this we can enter in different markets by expanding our business .

Option to abandon:

I have seen also this , A client is operating with huge losses and unable to recover the company fixed costs and by future forecasting seems to be huge losses and in this situation the organization will take decisions like removing huge employees,operating segments etc to less down costs . The company had done all actions but it is operating fully losses and it has only one option i.e to abandon .