Investment Timing Option: Option Analysis Kim Hoteis is interested in developing a new hotel in Seoul, The company estimates that the hotel would require an inliat investment of $20 million. Kim expects the hotel will produce positive cash-flows of $3 million a year at the end of each of the next 20 years. The project's cost of capital is 13%. Kim expects the cash flows to be $3 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax, One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.2 million. At the same time, there is a sow chance that the tax will not be imposed, in which case the yearly cash fows will be $3.8 miltion. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax wil be imposed. If Kim waits a year, the initial investment wil remain at $20 milion. Assume that all cash flows are discounted at 13%. Use the Btack-5chotes model to estimato the value of the option. Assume that the variance of the project's rate of return is 0.0732 and that the risk-free rate is 7%. Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places. Use computer software packages, such as Minitab or Excel, to solve this problem. million