Hello.
I studied the question and think that it should be under the type of real option to delay.
However, I didnt quite get it for the 35M costs.
For the NPV calculated that is no option to delay, the 35M cost is assumed to be spend in Year 2 and discounted for 2 years.
For the NPV calcuated for option to delay, the 35M seems also considered to be spent it Year 2.
So it didnt lead to the benefits of the delayed option??
https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/p4/technical-articles/investment-appraisal.html
Example 1: Delaying the decision to undertake a project
A company is considering bidding for the exclusive rights to undertake a project, which will initially cost $35m.
After I read the previous link article, i had the above confusion. The above example for BSOP they had the Pa and Pe discounted for 2 years more that the one with no real option
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]JUNE 2011 MMC
2y ago#1In MMC, Pe is 35M. Although this is paid in 2 years time, the multiplying of it in the formula by the term with the 'e' in it is effectively discounting it for 2 years, as I explain in my free lectures. So it is being discounted and doesn't need discounting again :-)
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