Zion Aviation

Rates:

Discount rate $7\mathrm{.}5\%$ Option Pricing:

Risk$-$free rate $4\mathrm{.}5\%$ PV of Cap. Ex$.($Yrs$.1-2)$

Scenario: No Real Options Maturity $4\mathrm{.}0$

Start $1234567$ PV of NCF

Cash from Operations $6\mathrm{.}07\mathrm{.}08\mathrm{.}58\mathrm{.}59\mathrm{.}011\mathrm{.}012\mathrm{.}0$ Risk free rate

minus: Capital Expenditures $4\mathrm{.}05\mathrm{.}05\mathrm{.}04\mathrm{.}05\mathrm{.}05\mathrm{.}05\mathrm{.}05\mathrm{.}0$ Volatility $20\%$

$=$ Net Cash Flow $($NCF$)(4\mathrm{.}0)1\mathrm{.}02\mathrm{.}04\mathrm{.}53\mathrm{.}54\mathrm{.}06\mathrm{.}07\mathrm{.}0$ BS calculations:

Terminal Value $11\mathrm{.}0$ d$1$ #DIV$/0!$

PV of NCF $0\mathrm{.}1$ N$($d$1)$ #DIV$/0!$

Scenario: Real Options d$2$ #DIV$/0!$

Start $1234567$ N$($d$2)$ #DIV$/0!$

Cash from Operations $-6\mathrm{.}07\mathrm{.}08\mathrm{.}58\mathrm{.}59\mathrm{.}011\mathrm{.}012\mathrm{.}0$ Price of call #DIV$/0!$

minus: Capital Expenditures $4\mathrm{.}04\mathrm{.}05\mathrm{.}05\mathrm{.}05\mathrm{.}05\mathrm{.}0$ Difference:

$=$ Net Cash Flow $($NCF$)(4\mathrm{.}0)4\mathrm{.}53\mathrm{.}54\mathrm{.}06\mathrm{.}07\mathrm{.}0-$ Value of Option over PV

Terminal Value $11\mathrm{.}0-\%$ of PV

PV of NCF

PV of Cap. Ex$.($Yrs$.1-2)$