Here we follow Copeland and Weston (1992) and calculate the aban-
donment put value. One uses the present value of the abandoned cash flow
as the equivalent of the stock price, the abandonment value as the exercise
price, and a two-year period for the option. If the risk-free rate is 3 per-
cent, the value of the put option is calculated to be $25.51 million.
N(d 1 ) = .09N(d 2 ) = .06vc=−
−=−===−40 192 0970
2 71828 03 20636270
106063 62 3 96 34.(.)
..()(. ).
.(. )...d 2 =−−=−−=1 36..163 2 1 36.(.). 23 1 59d 140 192
7003 2163 21
2163 255 06
163 21
2163 255 06
3312 1 36=
+
+=−+
+=−+
+=−ln.
.().(. )..
.()(. )..
...dd 21 ==σtdP
Exrtttcs11
2=
+
+lnσσvPNdEx
eccs=−() (^12) rtNd( )