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This question is a variant of the Sport Hotel example that was presented in class, in the class notes, and in the Real Option chapter.

This question is a variant of the Sport Hotel example that was presented in class, in the class notes, and in the Real Option chapter. Suppose that in the example, the first year expenditures that include the purchase of plans and permits is not $1 million but instead $1.3 million. All other aspects of the problem are the same as originally presented. Incorporating these new values, the probability that the city is awarded the franchise at 50%, and the real option, what is the new NPV of the project?

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