Estimate the value of the company with the standard npv, Financial Management

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Estimate the value of the company with the standard npv

A ship next year is worth 1100 in up-market, 230 in down-market. The probability of up-market is 65%. At any time owners can choose to scrap the ship for 275 now or 320 in one year. The cost of capital is 10%, risk free rate is 5%, beta is 1.

a) Estimate the value of the company with the standard NPV.

b) Estimate the value of the company with the DTA NPV.

c) How much is flexibility worth?

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