Investment Timing Option: Option Analysis Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would repure an initual investment of $20 inulbon. Kan 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 1376 : Kim expects the cash flows to be 53 million a year, but it recognizes that the cash flows could actually be much higher or lowec, depending on whether the Korian povernment imposes a large hotel tax, One year from now, Kim will know whether the tax will be imposed. There is a sos, chance that the tax will be imposed, in Which case the yearly cash flows will be only $2.2million, At the same time, there is a 50% chance that the tax will not be imponed, in which case the yearly cash flows will be $3.6 million. Kum is deciding whether to proceed with the hotel today or to wat a year to find out whether the tax will be inposed. If Kart waits a year, the instial investment will remain at $20 milion. Assume that all cash flows are discounted at 13\%4. Use the Black-Scholes modef ro estimate ithe value of the option. millons. For example, an answer of $1.234 miltion should te entered as 1.234 , not 1,234,000. Round your answer to three decanal places. Usat computer solfware packages, such as Manitab or Excel, to solve this problem. i. milion