Hey me and my group members were discussing the interpretation of this sentence:

Suppose now that the firm builds only one plant at the beginning of the first year, but has the flexibility in building more plants in the second and third years. That is, the company has the option of not building any plant or building one more plant in each of the next two years.

Does this mean that the company has 4 options (build in yr 1 2 3, build in yr1 2, build in year 1 3, or build in just 1) or does it mean they only have 2 options (build just in year 1, not build in years 2 and 3 orrrr build in year 1 and build in 2 and 3)?

the first one, four options

ya I think I'd go with they have four options, just a matter of what the company thinks is best for it either in the long run or the short run.

four options

Alright thanks for the help guys, going with 4

It's late but I thought it would be 3 options. I'm probably not reading it correctly.

Let me guess, this is for a Corp Finance class and you are valuing real options?