SHOW THE STEP BY STEP CALCULATIONS FOR PART 2 ONLY

Analysis of a Timing option (Dollars in Thousands) FIGURE 13.3 Part I. Project Without the Timing option NPV@ Cash Flow at End of Period 12% Outcome Prob $2,000 $1,804 $2,000 Good $3,000 $2,000 50% $1,919 $450 $450 $450 50% $3,000 Expected NPV $58 Standard Deviation (o) $1,861 Coefficient of Variation CV a Expected NPV 32.23 Part II, Delay the Decision Until We Know the Market Conditions Cash Flow at End of Period NPV@ 12% outcome Prob. $3,000 $2,000 $2,000 $339 50% Good 50% Expected NPV $170 Standard Deviation (a) Coefficient of Variation CV Expected NPV 1.00 Part III, Value of the Option