2023 Real Options Homework This is an individual assignment Please refer to Practice Problem | Assignments Online
2023 Real Options Homework This is an individual assignment Please refer to Practice Problem | Assignments Online
Assignments Online 2023 Business Finance
Real Options Homework This is an individual assignment. Please refer to Practice Problem I (not the “more difficult” one) in the Session 7 Conference. The assignment is to evaluate both parts, the traditional NPV calculation as well as the Real Options approach. The probability of a successful pilot project is now .72 (instead of .5) and the probability of an unsuccessful pilot is .28 (instead of .5). Also, the perpetuity in the “bad” case is now $1.8 million per year, not $2 million. What is the expected NPV in each case now? What do you recommend? Why? If you don’t know the probability of success for the pilot, is there a value that is critical to your recommendation? Is there a probability of success above or below which you will recommend undertaking the pilot and below or above which you will recommend a go/ no go decision on the underlying project without undertaking a pilot test?
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