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Annual cash flows for Alpha Inc. are expected 2 mil every year for the foreseeable future. The firms risk-adjusted discount rate is 10%. The volatility

Annual cash flows for Alpha Inc. are expected 2 mil every year for the foreseeable future. The firms risk-adjusted discount rate is 10%. The volatility in the value of the firm can be measured through its stock price volatility, which is 20%. The risk free rate is 4%. Next year, the firm has the option to expand and double its operation by acquiring its competitor for 40 mil. What is the value of this expansion option?

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