The following is a hypothetical stock price of ABC, Inc. for the next 2 years. The company does not pay dividend. Each step represents one year. Current stock price is $100 and the risk-free rate is 4%.

1. Using the tree, calculate the price of an American PUT option with $95 strike price and 2 years to maturity.
2. Based on the Real Option framework, how much is the value of early exercise in this case?

$121 $110 $100 $99 $90 $81 1st year 2nd year