1. Flexibility options allow a firm to potentially switch between various products and or services. Suppose you are considering how to heat a large commercial building. How might you decide to heat the building if you foresee extreme variability in the price of various types of energy (gas, electric, wind, coal, oil).

		a. You would choose whatever fuel source (gas, electric, wind, coal, oil) provides the least cost based solely on current prices.
		b. You would consider the possibility of price changes and your ability to react to those price changes. You may engage in a heating source that has the flexibility to switch to various sources of fuel based on the current market prices of these fuel sources.
		c. You would choose to diversify and heat with all the various sources of fuel and therefore have an average price that is less than the highest fuel source, but more than the lowest fuel source.
		d. You would choose wind power, because though it costs more and is expected to continue to cost more than the other fuel sources you value it because the price is always the same.

2. You are considering expanding your firm that builds franchise restaurants. Currently you do some work in this area, but if you invest additional funds in equipment and training you hope to double the size of your business. Recently you were contacted by an investor who is considering building 100 new restaurants over the next 5 years. If you expand you will be able to handle the investors account. If you don't expand you will not be able to handle their account. What options might impact your decision?

		a. You decide to lease all of your equipment for five years with a "cancellation clause" that allows you to return the equipment for an extra fee.
		b. You decide to take on the customer, but you also begin to market your firm to other investors in other lines of construction so that you might have some flexability if the franchise restaurant market declines.
		c. You delay the purchase of any equipment and instead work your current crew overtime and slowly hire more workers and buy equipment if needed.
		d. All of the above represent plausible options that may be considered.

3. Increased uncertainty in business and in life makes the value of options more or less valuable? More than one answer is possible.

		a. makes options more valuable - because an option can potentially decrease risk
		b. makes options less valuable - because an option can potentially increase risk
		c. makes options more valuable - because an option can potentially increase risk
		d. makes options less valuable - because an option can potentially decrease risk

4. Several real options that are often considered include:

		a) Abandonment
		b) Expansion
		c) Delay
		d) Alternative use (abandon one use and expand an alternative use)
		e) All of the above