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Class Example 3 A project is worth...

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Accounting

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Class Example 3 A project is worth $15 million today without an abandonment option. Suppose the value of the project is either $20 million one year from today (if product demand is high) or $10 million (if product demand is low). It is possible to sell off the project for $13 million if product demand is low Calculate the value of the abandonment option if the discount rate is 5 percent per year

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