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Let the current value from production equal V = 100, and this value may move up or down in the next period (t = 1)
Let the current value from production equal V = 100, and this value may move up or down in the next period (t = 1) up to V = 150 and V = 67. Let's assume that at t = 1 the management has the option to invest 90 million to double the production value. The risk-free rate is 2%. You should only consider the periods given.
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To value this option we can use a decision tree analysis considering the possible production values ...
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
