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What is the value of the real option associated with project

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Reference no: EM132547175

Koor, Cni. is making an investment of $1,000,000, which will earn future cash flows with a present value of $1,200,000 if the economy continues to improve. There is a 10% chance the economy will take a downturn, though, in which case the present values of future cash flows will be $900,000. Rook could sell off the assets associated with the investment if there is a downturn instead of continuing with the project, which will result in future cash flows with a total present value of $1,050,000.

Question 1: What is the value of the real options associated with this project?

Reference no: EM132547175

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