Wolfcorp has a plant that can generate a cash flow of $5 million annually. Because of a
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Wolfcorp has a plant that can generate a cash flow of $5 million annually. Because of a new regulation that the government will announce shortly, the cash flow next year will either increase by 22% or decrease by 24%, with a probability of 41% and 59%, respectively. Wolfcorp's CEO expects the above change to be permanent. The expense to run this plant is $$4.5 million per year. The cost of capital for this plant is estimated to be 4.4%. Wolfcorp can shut down the plant at the cost of $0.1 million at any time.
The value of the option to abandon the plant will be closest to?
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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