Question
A project has expected cash flows with a present value of $61.5 million. The annual standard deviation of the project's returns is 35%. The company
A project has expected cash flows with a present value of $61.5 million. The annual standard deviation of the project's returns is 35%.
The company can delay the start of the project by 1 year to find out more about the demand for the product. If the company decides to go ahead with the project after 1 year, the company needs to invest $41 million.
The risk-free rate is 5% (continuously compounded).
What is the value of the option to delay (in $ million)?
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Management Of Islamic Finance
Authors: M. Kabir Hassan, Mamunur Rashid
1st Edition
1787564045, 978-1787564046
