Python 3.6

Write a program to simulate the returns of an asset with and without an abandonment option.

Scenario: A firm can invest in an asset that returns cash flows each period that grow in either a up scenario or a down scenario from the previous period. A baseline estimate is provided to generate the first period returns.

Inputs: Users can input the baseline for the return, the initial investment, the UP growth rate, the DOWN growth rate, the probability of the UP rate, the number of periods, and the number of simulations.

1) Calculate the returns for each simulated asset.

2) Consider the case where the firm can lease the asset over n periods, where the leaser rate is (initial investment/number of periods). The firm has the option to abandon the asset after the first period.

If calculate the value of the asset when the asset is abandoned after the first period returns are in the down state.

This is the sample output below

Enter the baseline cash flow: 100

Enter the growth of the return in the up state: .2

Enter the growth of the return in the down state: -.1

Enter the probality of the up state: .5

Enter the number of periods: 2

Enter the initial investment: 200

Enter the number of simulations: 3

Simulated cash flow was: $90.00 $108.00 Total cash flow was: $198.00 Value of the standard investment was: $-2.00 Value abandononment after 1 period: $-10.00

Simulated cash flow was: $90.00 $108.00 Total cash flow was: $198.00 Value of the standard investment was: $-2.00 Value abandononment after 1 period: $-10.00

Simulated cash flow was: $120.00 $144.00 Total cash flow was: $264.00 Value of the standard investment was: $64.00