Question: The static project value, defined as the net present value of future project cash flows ignoring any real options, is $283 million right now. The

The static project value, defined as the net present value of future project cash flows ignoring any real options, is $283 million right now.

The standard deviation of static project value is 69.0%, the riskfree rate is 0.00%, the project can be abandoned at any time for a salvage value of $75.0 million, the time to project completion is 3.1 years, and an 8 period binomial model will be used?

The flexible project value is defined as the static project value plus the value of any real options. When should the project be abandoned? What is the flexible project value? What is the value of the option to abandon?

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