Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 276

Considering the Project with Expansion Option

! NPV of Disney Channel in Mexico = $ 80 Million - $ 100 Million = - $ 20

Million

! Value of Option to Expand = $ 36. 3 Million

! NPV of Project with option to expand

= - $ 20 million + $ 36. 3 million

= $ 16. 3 million

! Take the first investment, with the option to expand.

A bad project, with options considered, becomes a good one.