Investment Timing Option: Option Analysis Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of 520 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 137 ; Kim expects the cash flows to be $3 milion 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 sowi chance that the tax will be imposed, in which cose the yearly cash fiows will be only $2.2 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows wiif be $3.3 milion. Kim is deciding whether to proceed with the botel todey or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at 520m milion. Aswume that all cash flows are discounted at 1376 . Use the Black.Scholes model to estimate the value of the option. Asrume that the vartance of the project's rate of retum is 0.0732 and that the nak-free rate is 7%. Do not round intermediate calculations. Enter your answer in miliont. Foe exsmple, an antwer of 41.234 mition should be entered as 1.234, not 1.234,000. Hound your answer to three decimal places. Use computer toftware packeges, such as Minitab of Ercel, to solve this problem. (8 milion