A small oil and gas exploration and production company that owns an oil lease that will expire in one year if the company has not commenced development activities by then.The company must decide whether they should develop the property now or wait until just before the lease expires. The company estimates that it could develop the property now at a cost of $25M, and based on the current price forecast and future projected production volumes, the estimated current present value of the property is $26M.If the company were to wait to develop, they estimate the value of the property in one year will vary with volatility of 12%.The risk-free rate is currently 5%.

a)Should the company invest now or wait?

b)What is the project value under your recommendation?