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Hello,
initial cost of the project = $2500000
discounted inital cost of the project = $2029000in the answer the Exercise price in bsop model (Pe) is the undiscounted initial cost of the project,could you please tell me why we’ve not taken the discounted value?
Thanks
Pe is not discounted – it is the amount of the exercise price, which is 2,500,000.
Have you watched my free lectures on option pricing?
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