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