Value the real option using the Black-Scholes model: Your company has the opportunity to invest in a project which will cost $2,900 million. With the current political risk in the global economy, this project currently requires a very high discount rate and has a PV of future cash flows of $2,800 million. This project has a life of 15 years and the company has an opportunity to delay commencement for the next two years, so they can avoid a global recession. The project's cash flows volatility is the same as the volatility of company's returns, and the current risk-free rate is the same as you have applied previously. How much is this project worth without the real option? How much is this option worth?

Template - Black-Scholes Option Value Input Data Stock Price now (P) 2.8 Exercise Price of Option (EX) 2.9 Number of periods to Exercise in years (t) 2 Compounded Risk-Free Interest Rate (rf) 0.84% Standard Deviation (annualized o) 17.17% Output Data Present Value of Exercise Price (PV(EX)) 2.8517 o*t^.5 0.2428 d1 0.0461 d2 -0.1967 Delta N(d1) Normal Cumulative Density Function 0.5184 Bank Loan N(d2)*PV(EX) 1.2035 Value of Call 0.2480 Value of Put 0.2997Black-Scholes Option Pricing Model with Dividends Current Stock Price 2.80 Exercise Price 2.90 Risk-Free Interest Rate 0.84% Expected Life of Option 2 years Volatility 17.2% Dividend Yield 0% Call Option Value $ 0.25 Note: Enter values in the light cells in the spreadsheet