Calculate the value of the real option described in the case using a binomial model with 25 steps.

 

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Domestic Demand BUD Volume Price per barrel Revenue COGS G&A Depreciation EBIT Tax EBIAT Add back Depreciation Operating CF Terminal Value Change in WC TV of change in WC FCF Terminal Value PV OpCF 2002 Value of Op CF 1995 Value of Op CF 2002 Fixed capital Inv 2002 NPV 1995 NPV Working Capital $ $ $ $ -$ -$ $ $ $ $ $ $ $ $ -$ -$ $ 2003 11,894 400 17148 68,593 $ 26,065 $ 10,975 $ 100,000 $ 68,447 $ 26,010 -$ 42,437 $ 100,000 $ 57,563 $ 3,430 $ 54,133 $ 49,257 $ 1,377,397 711,337 2,500,000 1,122,603 579,752 3,430 $ 2 2004 12,131 600 17663 2005 12,374 900 181.93 4 2006 12,621 990 187.38 5 2007 12,874 1,089 6 2008 13,131 1,198 2009 13,394 1,318 193.01 198,80 204.76 2010 13,662 1,449 210.90 2011 13,935 1,594 217.23 10 2012 14,214 54,939 $61,632 $61,571 $ 60,323 59,321 $58,546 $ 57,983 $57,615 $ 1,754 105,976 $163,733 $185,510 $210,183 $238,137 $269,909 $305,694 $346,351 $ 392,416 $ 40,271 $62,219 $70,494 $ 79,869 $90,492 $102,528 $116,164 $131,613 $ 149,118 $ 16,956 $26,197 $29,682 $ 33,629 $ 38,102 $ 43,169 $ 48,911 $ 55,416 $ 62,787 $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $ 51,251 $ 24,683 -$14,665 $3,316 $9,543 $ 24,112 $ 40,619 $ 59,322 $ 80,511 $ 19,4759,379 $5,573 $ 1,260 $ 3,625 $9,163 $ 15,435 $ 22,542 $ 30,594 $ 31,776 15,303 $9,093 $2,056 $ 5,917 $14,950 $25,184 $ 36,779 $ 49,917 $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $ 68,224 84,697 $ 90,907 97,944 $105,917 $114,950 $125,184 $136,779 $ 149,917 $ 5,299 $8,187 $9,275 $ 10,509 $ 11,907 $13,490 $ 15,285 $17,318 $ 223.75 1,869 $ 2,888 $ 1,089 $ 1,234 $ 1,398. $ 1,584 $1,794 $2,033 $ 2,303 $ $ $ $ 66,355 $81,809 $89,819 $ 96,710 $104,519 $113,366 $123,390 $134,746 $ 147,614 57,431 $ $ 19,621 $ 11 2013 14,498 1,929 230.46 444,607 168,951 71,137 100,000 104,519 39,717 64,802 100,000 164,902 2,127,823 2,610 33,693 162,192 2,094,130 57,419 741,360 22,230 Domestic Demand BUD Volume Price per barrel Revenue COGS G&A Depreciation EBIT Tax EBIAT Add back Depreciation Operating CF Terminal Value Change in WC TV of change in WC FCF Terminal Value PV OpCF 2002 Value of Op CF 1995 Value of Op CF 2002 Fixed capital Inv 2002 NPV 1995 NPV Working Capital $ $ $ $ -$ -$ $ $ $ $ $ $ $ $ -$ -$ $ 2003 11,894 400 17148 68,593 $ 26,065 $ 10,975 $ 100,000 $ 68,447 $ 26,010 -$ 42,437 $ 100,000 $ 57,563 $ 3,430 $ 54,133 $ 49,257 $ 1,377,397 711,337 2,500,000 1,122,603 579,752 3,430 $ 2 2004 12,131 600 17663 2005 12,374 900 181.93 4 2006 12,621 990 187.38 5 2007 12,874 1,089 6 2008 13,131 1,198 2009 13,394 1,318 193.01 198,80 204.76 2010 13,662 1,449 210.90 2011 13,935 1,594 217.23 10 2012 14,214 54,939 $61,632 $61,571 $ 60,323 59,321 $58,546 $ 57,983 $57,615 $ 1,754 105,976 $163,733 $185,510 $210,183 $238,137 $269,909 $305,694 $346,351 $ 392,416 $ 40,271 $62,219 $70,494 $ 79,869 $90,492 $102,528 $116,164 $131,613 $ 149,118 $ 16,956 $26,197 $29,682 $ 33,629 $ 38,102 $ 43,169 $ 48,911 $ 55,416 $ 62,787 $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $ 51,251 $ 24,683 -$14,665 $3,316 $9,543 $ 24,112 $ 40,619 $ 59,322 $ 80,511 $ 19,4759,379 $5,573 $ 1,260 $ 3,625 $9,163 $ 15,435 $ 22,542 $ 30,594 $ 31,776 15,303 $9,093 $2,056 $ 5,917 $14,950 $25,184 $ 36,779 $ 49,917 $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $ 68,224 84,697 $ 90,907 97,944 $105,917 $114,950 $125,184 $136,779 $ 149,917 $ 5,299 $8,187 $9,275 $ 10,509 $ 11,907 $13,490 $ 15,285 $17,318 $ 223.75 1,869 $ 2,888 $ 1,089 $ 1,234 $ 1,398. $ 1,584 $1,794 $2,033 $ 2,303 $ $ $ $ 66,355 $81,809 $89,819 $ 96,710 $104,519 $113,366 $123,390 $134,746 $ 147,614 57,431 $ $ 19,621 $ 11 2013 14,498 1,929 230.46 444,607 168,951 71,137 100,000 104,519 39,717 64,802 100,000 164,902 2,127,823 2,610 33,693 162,192 2,094,130 57,419 741,360 22,230

Answer rating: 100% (QA)

SOLUTION Here are the key metrics calculated from the provided data Net Present Value NPV in 2002 11... View the full answer