OPTION WORKSHEET: LONG TERM OPTIONS

VALUING AN OPTION TO ABANDON A PROJECT

This program calculates the value of an abandonment option.
Inputs relating the underlying asset
Enter the present value of cash flows from continuing project =

$254.00

(in currency)

Entet the annualized standard deviation in ln(present value of CF)

30.00%

(in %)

25

(in years)

$150.00

(in currency)

10

(in years)

7.00%

(in %)

Enter the remaining life of the project =

Enter the value received on abandonment =
Enter the number of years that you have rights to abandon project

General Inputs
Enter the riskless rate that corresponds to the option lifetime =

VALUING A LONG TERM OPTION/WARRANT

Stock Price=

$254.00

T.Bond rate=

Strike Price=

$150.00

Variance=

Expiration (in years) =

10

Annualized dividend yield=

7.00%
0.09
4.00%

(Net out any abandonment costs)

(< or = project life)

OPTION WORKSHEET: LONG TERM OPTIONS

d1 =

1.34575888

N(d1) =

0.910809855

d2 =

0.397075582

N(d2) =

0.654344137

Value of Option to Abandon =

$10.56