Though complicated, real options help managers make more informed decisions in selecting projects that add value to a firm.

Which type of real option allows a firm to postpone a project until it can gather more information?

a. Growth option

b. Investment timing option

c. Abandonment option

Consider the following situation:

Arjen used an oil futures contract in order to price an exploration project that has an abandonment option.

Is it more likely or less likely for Arjen to recommend accepting the project because it has an abandonment option?

a. Less likely

b. More likely