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Maxim Technologies is considering a $ 2 0 million investment in a new plant to produce digital thermometers. Maxim expects the present value of the
Maxim Technologies is considering a $ million investment in a new plant to produce digital thermometers. Maxim expects the present value of the project's future cash flows to be $ million in five years' time, if it is unsuccessful. However, if the project is successful, Maxim expects the present value of its future cash flows to be $ million in five years' time. In that case, Maxim will be able to increase the present value of the project by $ million, by investing an additional $ million in the expansion of the plant. What is the value of the option to expand the plant, given that the riskfree interest rate is paEnter your answer as a number rounded to two decimal places, in units of a million dollars. So if the value of the option is $ million, you should enter as your answer.
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