What is the rationale for this argument

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At year 0, UNO has to invest $15 mil. If new considering developing a new pizza menu is a success (30% probability), year 1 CF = $70 mil. If the new menu is failure (70% probability). year 1 CF = $-20 mil. What is the NPV of this project?

If a new pizza menu is success, UNO can develop as new lasagna as a side menu. This lasagna is expected a CF of $50 mil in year 2. What is the NPV of project with this real option?

We learned in class that the "option to expand" is an implicit call option. What is the rationale for this argument?

In other words, how are these two concepts option to expand' and "call option') related to each other? Explain in 1 2 sentences.

Reference no: EM132062586

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