8.4 Review Section 8.1.2 and value the deferral option of the first example of Section 8.1.1 using...

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8.4 Review Section 8.1.2 and value the deferral option of the first example of Section 8.1.1 using the cash flows the investment opportunity would generate if it were undertaken at time zero. Note that the value of such an asset would be $5,500. Assume you short it and compute your liability in year 1 at the time of the occurrence of the first cash flow under each possible realization.

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