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Valuing Project Delay Options Worksheet

This document provides an option valuation worksheet for calculating the value of an option to delay making an investment in a project. It lists the required inputs such as the present value of the project's cash flows, the standard deviation of returns, initial investment cost, and time period for the option. The output shows the calculated value of the option to delay is $51.03 based on the inputs provided, using the Black-Scholes model.

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80 views2 pages

Valuing Project Delay Options Worksheet

This document provides an option valuation worksheet for calculating the value of an option to delay making an investment in a project. It lists the required inputs such as the present value of the project's cash flows, the standard deviation of returns, initial investment cost, and time period for the option. The output shows the calculated value of the option to delay is $51.03 based on the inputs provided, using the Black-Scholes model.

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Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLS, PDF, TXT or read online on Scribd

OPTION WORKSHEET: LONG TERM OPTIONS

VALUING AN OPTION TO DELAY A PROJECT

This program calculates the value of the option to delay making an investment.
Inputs relating the underlying asset
Enter the present value of cash flows from investing $350.00 (in currency)
Entet the annualized standard deviation in ln(present 22.36% (in %)
Enter the initial investment needed to take project (i $500.00 (in currency)
Enter the number of years you have rights to project 20 (in years)

General Inputs
Enter the riskless rate that corresponds to the option 7.00% (in %)

Output
Stock Price= $350.00 T.Bond rate= 7.00%
Strike Price= $500.00 Variance= 0.05
Expiration (in year 20 Annualized dividend yield 5.00%
OPTION WORKSHEET: LONG TERM OPTIONS

d1 = 0.54332506
N(d1) = 0.70654699

d2 = -0.45667494
N(d2) = 0.32395235

Value of Option to Delay = $51.03

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