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"Which one of the following is an example of a "flexibility" option?

"Which one of the following is an example of a “flexibility” option?

a. A company has an option to invest in a project today or to wait for a year before making the commitment.
b. A company has an option to close down an operation if it turns out to be unprofitable.
c. A company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
d. A company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
e. A company invests in a jet aircraft so that its CEO, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly a commercial airline.

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Finance - 8099240.doc

QID – 8099240
Solution:
c. A company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or
outputs at a later date if conditions change.

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