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Class Example 4 A project is worth $12 million today without an abandonment option if...

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Class Example 4 A project is worth $12 million today without an abandonment option if the interest rate is 5 percent per year Suppose the value of the project is either $18 million one year from today (if product demand is high) or $8 million (if product demand is low). it is possible to sell off the project for $10 million if product demand is low Calculate the value of the abandonment option if the discount rate is 5 percent per year

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