What is the value of the project if you have both the expansion and contraction options?
A project has a present value (PV) of $100 million today and will be worth either $140 million or $80 million next year. Assume that the simple annual risk-free rate is 5%, and the project costs $105 million today. 1. Should you do the project based on the NPV analysis? 2. If the project can […]