The company believes that this project has a strong selling feature but is uncertain the project has come up with the following data: Demand Probability Annual Cash Flow High 0.40 $50 million Average 0.40 $35 million Low 0.20 $15 million 9.00% Project's cost of capital Life of project 52-week Treasury note Three years 5% The project team also noted that the company has an option to wait for one year in order responds. This will help in getting more information about market demand and in figuring Analysts used different approaches to evaluate the project, but the management team ins help them make a more informed decision. The model requires five inputs: (1) the risk-fre price; (4) the current price of the stock, which in this case would be a proxy for the value expected return Based on the data given, calculate the value of the project, its return, and the standard deviation of the returns (using the direct method) if the company decides to wait for a year. (Note: Cash low values in the table are in milions. Round all final answers to two decimal places.) Now: Yr Yr Yr Yr PV Cash PV Cash Return ro P Probability (P) Probability (P)x 1 2 3 4 flows (t=1) PV Cash Flow - flows (t=0) Return PV Cash Flows 1 High 0.40 $50 $50 $50 Average 0.40 $35 $35 $35 Low 0.20 $15 $15 $15 Expected return (ta1): Standard deviation of returns: Expected Value of PVs (t = 1) Expected Value of PVs (0) Analysts will use these values in the Black-Scholes model, which is represented by the following formula: V = PIN (d) - Xe TRF IN (D2)] TRE t X Based on the data collected and results from the calculations, estimate the input values to be used in the Black-Scholes OPM: = Risk-Free Interest Rate Time until Option Expires - Cost to Implement the Project - Current Value of the Project Variance of the Project's Rate of Return N(d) -Cumulative Normal Distribution Function of dy N((In ) + (rre+ (o? /2)]/(t2) Nd) - Cumulative Normal Distribution Function of de N(d) - ) P Grade It Now S