Using the real option methodology

Assignment Help Financial Management

Reference no: EM131446757

A) Using the following information, compute NPV if we proceed TODAY as if there is no option.

B) Using the real option methodology, Should Kim wait a year? Compute NPV of waiting! Use WACC to disocunt ALL cash flows. Should we wait or proceed now?

Kim is considering purchuse= $ 17,000

Net Cash Flows=2,800

If wait one year---

Purchuse price= $ 17,500

High Cash flow= $3,800

Chance of high cash flow= 55%

Low cash flow= $ 1,400

Years project will go on =20

WACC=12%

Reference no: EM131446757

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