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Your management team has put together the following projections for a project that your company may be interested in implementing. Demand Probability Annual Cash Flow
Your management team has put together the following projections for a project that your company may be interested in implementing. Demand Probability Annual Cash Flow 20% High Average 60% $100,000,000.00 $40,000,000.00 $10,000,000.00 Low 20% 12% Project's cost of capital Life of project Required investment 3 $75,000,000.00 Use this information to answer the following questions. Question 1 1 pts Use the decision-tree procedure to project the expected NPV for the proposed project, ignoring any real option. [Round the final answer to the nearest cent] 1 Question 2 1 pts Use the decision-tree procedure to project the expected standard deviation for the proposed project, ignoring any real option. [Round the final answer to the nearest cent] > Question 3 1 pts Use the decision-tree procedure to project the expected NPV for the proposed project, considering an investment timing option to wait one year before implementation. [Round the final answer to the nearest cent] Question 4 1 pts Use the decision-tree procedure to project the expected standard deviation for the proposed project, considering an investment timing option to wait one year before implementation. [Round the final answer to the nearest cent] > Question 5 1 pts Use the decision-tree procedure to project the expected option value for the proposed project, considering an investment timing option to wait one year before implementation. [Round the final answer to the nearest cent] Question 6 1 pts Use the Black-Scholes model to calculate the value of the timing option to wait one year if the strike price is the cost of the project, the risk-free rate is 2.5%, and the variance in future cash flows is 0.25. [Round the final answer to the nearest cent] Question 7 1 pts Use the decision-tree procedure to project the expected NPV for the proposed project, considering a growth option to launch a second-generation project with the same cost and cash flows. [Round the final answer to the nearest cent] Question 8 1 pts Use the decision-tree procedure to project the expected standard deviation for the proposed project, considering a growth option to launch a second-generation project with the same cost and cash flows. [Round the final answer to the nearest cent] > Question 9 1 pts Use the decision-tree procedure to project the expected option value for the proposed project, considering a growth option to launch a second-generation project with the same cost and cash flows. [Round the final answer to the nearest cent] Question 10 1 pts Are the real options (investment timing and growth) associated with this project valuable? Yes O No
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