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Option Value

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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?

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The abandonment option only has value in the worst case. In that case the ...

Solution Summary

This solution analyzes the value of an abandonment option.

$2.19