<Li> Initiation or deferment options: Here management has flexibility as to when to start a project . For example, in natural resource exploration a firm can delay mining a deposit until market conditions are favorable . This constitutes an American styled call option . </Li> <Li> Option to abandon: Management may have the option to cease a project during its life, and, possibly, to realise its salvage value . Here, when the present value of the remaining cash flows falls below the liquidation value, the asset may be sold, and this act is effectively the exercising of a put option . This option is also known as a Termination option . Abandonment options are American styled . </Li> <Li> Sequencing options: This option is related to the initiation option above, although entails flexibility as to the timing of more than one inter-related projects: the analysis here is as to whether it is advantageous to implement these sequentially or in parallel . Here, observing the outcomes relating to the first project, the firm can resolve some of the uncertainty relating to the venture overall . Once resolved, management has the option to proceed or not with the development of the other projects . If taken in parallel, management would have already spent the resources and the value of the option not to spend them is lost . The sequencing of projects is an important issue in corporate strategy . Related here is also the notion of Intraproject vs. Interproject options . </Li> <P> Management may have flexibility relating to the product produced and / or the process used in manufacture . This flexibility constitutes optionality . </P>

Three methods of calculating a project’s financial value