A project is being evaluated that has a growth option to replicate the project at the end of year 4. The project cost $60 million and has a life of 4 years. The option is a 4 year option. The future demand for the product has an impact on the future cash flows from the project. In the event demand is high (30% chance) the annual cash flows will be $30 million. In the event demand is moderate (30% chance) the annual cash flows will be $15 million. In the event demand is low (40% chance) the annual cash flows will be $10 million. The project will only be replicated if the NPV is positive. Additionally, WACC = 10% and Risk-free rate = 6%.

Using the indirect method, what is the variance input for use in the Black-Sholes model? (please enter your answer in decimal form to 4 decimal spaces, e.g. 0.1234)

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