The following facts have been assembled to facilitate an analysis of an option to abandon a project currently being considered by Xiaomi Group ltd:

Risk-free rate of return8% Time until decision to abandon is taken0.64 years

PV of cash flows if the project is not abandonedKsh.415 million

Salvage value if abandonedKsh.480 million

The variance of the projects rate of return is being considered at different levels as follows: Var-13%

Var-26% Var-39% Var-412%

Required:

AssesstheeffectofachangeinthevarianceontheValueoftheAbandonmentOption

Using black-Scholes options valuation model.