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QUESTION
A project is worth $15 million today without an abandonment option. Suppose the value of the project is $20 million one year from today with high...
- A project is worth $15 million today without an abandonment option. Suppose the value of the project is $20 million one year from today with high demand (70% chance) and $10 million with low demand. It is possible to sell off the project for $12 million if the demand is low. Assuming a discount rate of 10%, which of the following is the value of the abandonment option (to the nearest $'000)?
