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.