Question 4. The world since November, 2019 has experienced health pandemic due to the coronavirus disease that has spread to almost all countries. This has led to upsurge in drug to cure people who have been infected by the virus. Fear not Ltd, a drug development company, has gained drug manufacturing permission for the manufacturing of a drug for COVID 19 which will be developed over a three-year period. The resulting drug sales less costs have an expected net present value of GH¢4 million at a cost of capital of 10% per annum. Fear not Ltd has an option to acquire has a volatility attaching to its net present value of 25%. One source of risk is the potential for absolute control over COVID 19 by people taking good care of themselves. Assuming within the next two years, the World Health Organization will make a pronouncement on whether the disease will be eradicated or not. The risk-free rate of interest is 5% per annum. You are required to: i) Identify and explain the variables that determine the value of a real option for Fear not Ltd? 6 marks ii) Compute the value of the option to delay the start of the project for two years using the Black Scholes option pricing model. 16 marksthe ownership of the drug at an agreed price of GH¢24 million, which must be exercised within the next two years (without the drug sales less costs with an expected net present value). Immediate preparatory and research would be risky as the project​