The Opportunity to Invest in a Project Can Be Thought

question 4

Multiple Choice

The opportunity to invest in a project can be thought of as a three-year real option that is worth $500 million with an exercise price of $800 million. Calculate the value of the option given that, N(d1) = 0. 3 and N(d2) = 0.15. Assume that the interest is 6% per year.

• A) $150 million
• B) $49.25 million
• C) Zero
• D) None of the above.

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Definitions:

Labor Schedule

A plan outlining the allocation and timing of employees' work hours.

Product Demand

The desire and willingness of consumers to purchase a specific quantity of a good or service at a given price within a certain time period.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a resource, such as labor or capital.

Marginal Revenue Product

The boost in revenue achieved by adding one more unit of a factor involved in production.