Options

Good day tutor,

Im a little bit confused at the moment with the value of real options. I assume I was doing the right method all along but am having doubts now.

The following questions all deal with options to delay.

Question 1 of June 2012 requires us to calculate the value of the project on the assumption that the production can be delayed following the acquisition of exclusive rights of production.
The NPV of this project was $405,000.
The call option’s value was $603,592.
The value of the whole project was $603,592.

Meanwhile in December 2007 Question 3 (Digunder co), the question required us to calculate the value of the project with an option to delay the development of a housing complex by 2 years.
The NPV of the project was $4m.
The call option’s value was $7.53m.
The value of the whole project was $11.53m.
This answer was also given in BPP’s 2017 revision kit.

In June 2011 Question 4 (MMC), the question required us to calculate the value of the project with an option to delay the development of a new computer game by 2 years.
The NPV of the project was $(2.98m)
The call option’s value was $9.53m.
The value of the whole project was $6.55m.

In June 2014 Question 4 Faoilean Co, the answer to part a mentioned “Faoilean Co can incorporate these uncertainties and the time before various decision need to be made into the option formulae to determine the additional value of the project, on top of the initial NPV calculation”

I read somewhere in this forum that when a project has an option to be delayed, the value of the call option would be equivalent to the value of the whole project.

Q1: Which is the correct method of finding the value of the whole project with an option to delay?

Q2: What about projects with an option to abandon?

I also read somewhere in this forum that the value of such project would be the value of the put option.

However, in December 2013 Question 1, the value of the whole Mehgam project was estimated to be $2,993,000 ($3,444,000 [put option’s value] – $451,000 [NPV]).

I am so sorry for the lengthy post.