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There is a project which can be bought at $12 million today (without any abandonment options). Suppose the value of the project is $20 million
There is a project which can be bought at $12 million today (without any abandonment options). Suppose the value of the project is $20 million one year from today with high demand and $5 million with low demand. It is possible to sell off the project for $10 million if the demand is low. Calculate the value of the abandonment option if the discount rate is 5% per year.
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