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:

Hormones

Biological molecules produced by glands that regulate bodily functions and behavior by traveling through the bloodstream to target organs.

Neurons

Nerve cells that transmit information throughout the body and brain, serving as the building blocks of the nervous system.

Reticular Formation

A structure in the brainstem that plays a crucial role in arousal and attention and that screens sensory messages entering the brain.

Cerebellum

A part of the brain located at the back of the skull, primarily responsible for coordinating voluntary movements and maintaining balance and posture.