A Firm Has a Two-Year Real Option to Invest in a Project

question 35

Multiple Choice

A firm has a two-year real option to invest in a project that has a present value of $400 million with an exercise price (in year 2) of $600 million.Calculate the value of the option given that N(d₁) = 0.6 and N(d₂) = 0.4.Assume that the risk-free interest rate is 6% per year.

• A)$26.4 million
• B)zero
• C)$239.59 million
• D)$13.58 million

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Definitions:

Nonverbal Behavior

Communication without the use of spoken language, including gestures, facial expressions, and body posture.

Physical Assessment

An evaluation of the body by a healthcare provider to detect signs of disease or abnormalities.

Registered Nurse

A nurse who has completed the necessary education and licensure requirements to provide patient care and administer medications.

Grumpy Behavior

Display of irritability or bad temper by an individual, often with a propensity to be easily annoyed or provoked.