Technology B uses standard machine tools. Labor costs are much higher, but the tools can be sold or shifted to another use if the engine doesn't sell. Suppose you can invest right away or wait. If the project is truly a winner, waiting means loss or deferral of positive early cash flows. If the project is a loser, waiting could prevent a bad mistake.
Optimal investment means exercising that call at the best time.
It can sometimes pay to exercise an American put before maturity in order to reinvest the exercise price. For example, suppose that immediately after you buy an American put the price of the underlying falls to zero. American calls on dividend paying stocks. If the dividend is sufficiently large, you might want to capture it and exercise just before the ex-dividend date. Warrants and Convertibles A warrant is an American call option issued by a company on its own stock.