1. A company is considering a project. The project requires investment of S100 now (t-0) and another investment of S100 after 1 year (t1). If the industry is in good state at t, the project will generate $468 at t-2. If the industry is in bad state at t-1, the project will generate $78 at t-2. The state of industry is known just before the investment at t1. If the firm does not invest S100 at t, the whole project will be closed and the cash at t-2 will not be obtained. The risk-free interest rate is 4%. A security which pays S1 after 1 year (t-1) when the industry is in bad state and 0 otherwise has a current (t-0) price $0.6. (a) Find the value of the project if the company is committed to finishing the project once it is started. (b) Find the value of the project if the company can choose to continue or to close the project when the state of industry at t-1 is known