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Basic Question 6 of 6
For projects with production facilities, it may not be optimal to operate a plant for a given period if revenues will not cover variable costs. If the price of oil falls below the cost of extraction, for example, it may be optimal to temporarily shut down the oil well until the oil price recovers. This is an example of:
B. Abandonment options.
C. Fundamental options.
A. Timing options.
B. Abandonment options.
C. Fundamental options.
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Edward Liu
Learning Outcome Statements
describe types of real options relevant to capital investments
CFA® 2025 Level I Curriculum, Volume 2, Module 5.