Incorporating these new values and the real option

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This question is a variant of the Sport Hotel example that was presented in class, in the class notes, and in the Real Option chapter. Suppose that the value of the hotel is not $8 million but instead is $8.8 million if the city is successful in obtaining the franchise, and is not $2 million but instead is $3.7 if the city is not successful in obtaining the franchise. All other aspects of the problem are the same as originally presented. Incorporating these new values, and the real option, what is the new NPV of the project?

Reference no: EM131527839

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