Usingthereplicating portfolio framework,weestimate the
valueoftheexpansionoptiontobe$203million.Thisvalue
canbeaddedtothenetpresentvalueoftheoriginalproject
under consideration.
Ambevshouldgoaheadwiththelimitedintroduction,even
thoughithasanegativenetpresentvalue,becauseitacquires
an option of much greater value as a consequence.
When Are Expansion Options Valuable?