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The value of a project is $ 1 0 0 and the cost at t = 0 is $ 1 0 4 . The project

The value of a project is $100 and the cost at t=0 is $104.
The project value follows a binomial model. It could go up to
$180 or down to $60. The government posts a guarantee of
$78 at time 1. What is the value of the option? The
required rate of return is 20% and the risk-free rate is 8%
per period.

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