Question: A company is developing a mine for an ore body containing silver, lead and zinc. However, the concentration of zinc is quite low and at current commodity prices it is not worth building zinc processing facilities- Therefore the current plan is to only build silver and lead processing facilities. However, the company has the option of spending extra on the design for the processing facilities to create a flexible design so that it can decide whether or not to add zinc processing later. The price of zinc is currently $105, but the price of zinc has an annual volatility of 0.39. The risk free rate is given by 0.03. The company is going to decide if it is worth spending the extra money on the flexible design based on a real options analysis using a 3 stage binomial lattice covering a period of 1 year. So far the values of u- d. PM) and PM) have been determined as follows:

Fill in the binomial Iatice for the price of zinc (Answer to 2 decimal places):

Price: $2.99

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