Assume the stochastic process for the value of the firm as shown in Fig. Q9.10 (it might be the present value of a project that has several investment phases). There are two call options in sequence. The first has an exercise price of $400, the investment required to move to the next phase at the end of year 1 when the option expires. It allows us to decide whether to abandon the project or continue by making an additional investment. The second has an exercise price of $800 and expires at the end of year 3. Given this information, solve the problem using a sequential compound option.
Figure Q9.10

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u'vg = 1.43334 / "2V0 = 1,271.25 < (E aVO = 1,127.50く() > “2dV0 = 1,127.50 V0= 1,000< dYe 886.92 〈(1 ud2 88692 d%-786.63 < d% = 697.68