Option to delay

Waiting can reveal information about demand, costs or regulation before an irreversible investment is made. The benefit must be balanced against delayed cash inflows, the cost of maintaining the right, competition and the possibility that the opportunity expires. A deferral option is often compared with a call on the project's future benefits, with investment expenditure as the exercise cost. That analogy requires careful input and assumption choices. A business cannot claim valuable delay flexibility if a competitor can freely take the opportunity or contractual deadlines prevent waiting.