Question: Rework Problem using the Black-Scholes model to estimate the value of the option: The risk-free rate is 6 percent. (Hint: Assume the variance of the project's rate of return is 1.11 percent.)
Problem: 1. In general, do timing options make it more or less likely that a project will be accepted today?
2. If a company has an option to abandon a project, would this tend to make the company more or less likely to accept the project today?