abandonment option value example problem

abandonment option value example problem - way that they...

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Situation 1: Cannot Abandon WACC= 12.00% End of Period Cash Flows 0 1 2 3 4 Best Case 25% -13000 16905 17128 16920 25112 Base Case 50% -13000 3351 3575 3367 23116 Worst Case 25% -13000 -4695 -4472 -4680 13512 Situation2: Can Abandon WACC= 12.00% End of Period Cash Flows 0 1 2 3 4 Best Case 25% -13000 16905 17128 16920 25112 Base Case 50% -13000 3351 3575 3367 23116 Worst Case 25% -13000 -4695 9122 0 0 ABC Company is evaluating a project and believes they can strucuture it in such a
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Unformatted text preview: way that they will have an option to abaondon the project at the end of year one and sel and received cash assets at the end of year 2 if things are going badly. a. Calculate the Expected NPV of the project under each of the 2 situations. b. Calculate the Abadonment Option Value for the...
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abandonment option value example problem - way that they...

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