Jim Owns a Farm That He Wants to Sell

question 7

Multiple Choice

Jim owns a farm that he wants to sell. He learns that a highway will be built near the farm in the future, giving access to the farmland from a nearby city and thus making the land attractive to housing developers. Expecting the net present value (NPV) of the sale to be greater after the highway is built, he decides not to sell at this time. What real option is Jim taking?

• A) option to delay
• B) option to expand
• C) option to abandon
• D) option to switch

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Definitions:

Flexibility

The ability to adapt to new, changing, or emerging conditions and situations with ease.