1. A company is considering a project. The project requires investment of $100 now (t-0) and another investment of $100 after 1 year (t1). If the industry is in good state at tl, the project will generate $468 at t-2. If the industry is in bad state at tl, the project will generate $78 at t-2. The state of industry is known just before the t at t. If the firm does not invest $100 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 $1 after 1 year (t1) 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 H is known