If the current situation exist with: Best Case NPV $600 with a Probability of .5, Worst Case NPV -$1,000 with a Probability of .2, and a Likely Case of NPV $300 with a Probability of .3 an abandonment option that could change the Worst case NPV to -$300 what is the value of the option at least: Would it be $470, $330, $190 or $140?
Please show me the steps of how you solve this.
The abandonment option only has value in the worst case. In that case the ...
This solution analyzes the value of an abandonment option.