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This document provides an input worksheet to calculate the value of an expansion option in an investment analysis. It requests inputs about the underlying asset such as the present value of expansion potential, annualized standard deviation in cash flows, initial investment needed for expansion, and number of years of rights to the project. It also requests general inputs like the riskless rate. The worksheet then displays the calculations to value the long term expansion option, providing values for d1, d2, N(d1), and N(d2) in the Black-Scholes model and displaying the final calculated value of the option to expand as $45.91.

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79 views2 pages

Expand

This document provides an input worksheet to calculate the value of an expansion option in an investment analysis. It requests inputs about the underlying asset such as the present value of expansion potential, annualized standard deviation in cash flows, initial investment needed for expansion, and number of years of rights to the project. It also requests general inputs like the riskless rate. The worksheet then displays the calculations to value the long term expansion option, providing values for d1, d2, N(d1), and N(d2) in the Black-Scholes model and displaying the final calculated value of the option to expand as $45.91.

Uploaded by

Pro Resources
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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OPTION WORKSHEET: LONG TERM OPTIONS

VALUINGANEXPANSIONOPTION

Thisprogramcalculatesthevalueofanexpansionoption
inaninvestmentanalysis.
Inputsrelatingtheunderlyingasset

Enterthepresentvalueofexpansionpotential(asassessedtoday)= $100.00 (incurrency)

Entettheannualizedstandarddeviationinln(presentvalueofCF) 31.62% (in%)

Entertheinitialinvestmentneededforexpansionoption(inPV$)= $150.00 (incurrency)

Enterthenumberofyearsyouhaverightstoproject 10 (inyears)
Enterthecostassociatedwithwaitinganextrayeartoexpand= 0.00%
GeneralInputs

Entertherisklessratethatcorrespondstotheoptionlifetime= 6.50% (in%)

VALUINGALONGTERMOPTION/WARRANT

StockPrice= $100.00 T.Bondrate= 6.50%

StrikePrice= $150.00 Variance= 0.10

Expiration(inyears)= 10 Costofdelay= 0.00%


OPTION WORKSHEET: LONG TERM OPTIONS

d1= 0.7445348919
N(d1)= 0.7717235298

d2= 0.2554651081

N(d2)= 0.3991819447

ValueofOptiontoExpand= $45.91

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