Consider the previous example. Now the investment cost $(C=5MTL$ and it is expected to be paid

immediately, but the uncertain revenue $x$ will come in the next year. Our goal is to find expected

discounted payoff from the project. The risk free interest rate is $40\%$

A$)$ Assume that there is a financial security whose returns are perfectly correlated with revenue $x.$

Currently the price of of security is $20TL,$ the price next year is estimated to be normally distributed with

a mean of $30TL,$ and standard deviation of $9.$ Find the risk adjusted discounted rate for revenues of

project.

B$)$ Find NPV using the risk adjusted discount rate. Should we invest in project?

C$)$ Find risk neutral revenue probability distribution. $($Should give the same NPV$)$

D$)$ Assume that there is an option to expand the business by investing an additional $6M$ TL next year

which would increase the revenue by $2x.$ What is the value of this option?