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hsk-free rate, which is 6 Scholes model to estimate rojects rate of return is 6 le 26-2 using the Wlack- Saholes model to estimate the walis the ance of the project's rate of return is 1.11% rk Problem 26-5 using the Black-Scholes model to estimate nik-free hat the vari is 6%.-.ne varianceng the to estimate the value of thhe opion urn is rate 687% and that the risk-free rate OPA Analysis te (26-8) Rewo Growth Option: ewo FADSHEET Model: Real We ewor o R6 ne that the variance of the project's rate of return is 20.25% Assume that estimate the value of the option eturn is 1.11% and that the risk-free option Analysis 6-9) d a Model: Real re Growth ofre. ) estimate the value of the option. urn is 20.25% and that the risk-free rate is 6%. Start with the partial model in the file Ch26 Po9 Build a Model.ais on thecsomiion Web site. Bradford Services Inc. (BSI) is considering a project SPREAD (26-9) Start nd an expected life of 3 years. There is a 30% probability of goo conch of the next ash oions nd an ex on the textbook's e the project will provide a cash flow of $9 million at the end of eaeue the ann guild a Model case 3 years. flows will be a cost of $10 million There is a 40% probability of medium conditions, in w will be $4 million, and there is a 30% probability to evaluate projects like ion of the lity of good conditions, in which on at the end of each of the next of -$1 million per year. BSI uses a 2 no ons, in which case the annual cash er year. BSI uses a 12% cost of capital to obability of bad conditions with a cash flow of capital to evaluate projects like this. alue, NPV, and the coefficient of variation of the a. Find the project's expected present value, NPV, and the coeffcient of varia ource present value. Now suppose that BSI can abandon the project at the end of the first for $6 million. BSI will still receive the Year-1 cash flows, but flows in subsequent years b. t at the end of the first year by selling it will receive no cash c. Now as sume that the project cannot be shut down. However, expertise gained by taking it on would lead to an opportunity at the end of Year 3 to undertake a venture that would have the same cost as the original project, and the new project's cash flows there would follow whichever branch resulted for the original project. In other wo would be a second $10 million cost at the end of Year 3 followed by cash flows of either $9 million, $4 million, or-$1 milion for the subsequent 3 years. Use decision-tree analysis to estimate the value of the project, including the opportunity In other words, to implement the new project at Year 3. Assume that the $10 million cost at Year 3 is known with certainty and should be discounted at the risk-free rate of 6%