The McDonald's Corporation has restaurants in more than 100 countries. Let's say the company's executives are mulling the decision to open additional restaurants in Russia. This would fall under the category of ______.

A. Timing options
B. Sizing options
C. Flexibility options

Correct Answer: B

The expansion would fall under the category of a real option to expand (sizing option). The investment or capital outlay would need to be calculated, including the cost of the physical buildings, land, staff, and equipment. McDonald's executives would need to decide if the revenue earned from the new restaurants will be enough to counter any potential country and political risk, which is difficult to value.

The same scenario could also produce a real option to wait or defer opening any restaurants until a particular political situation resolves itself (timing option). Perhaps there's an upcoming election, and the result could impact the stability of the country or the regulatory environment.