Estimate the mean and standard deviation of the project with the abandonment option. How much would you

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Estimate the mean and standard deviation of the project with the abandonment option.

How much would you pay for the abandonment option? (Hint: You can abandon a project at most once. Thus in year 5, for example, you abandon only if the sum of future expected NPVs is less than the year 5 abandonment value, and the project has not yet been abandoned. Also, after you abandon the project, the actual cash flows for future years will be

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Practical Management Science, Revised

ISBN: 9781118373439

3rd Edition

Authors: Wayne L Winston, S. Christian Albright

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