Ann: Lulo Special Distribution, page-23

Actually assuming the options are lower exercise price than the current stock price (which they must be for you to be assuming they are going to be all exercised) that part of your equation actually increases the project valuation rather than decreasing it.

Cash recieved = LOMOB Number of options x exercise price
MC increase = LOMOB number of options x current price

The difference in those 2 numbers is the increase in project value.

Same story with the shortfall options. Options very rarely decrease project or company enterprise value because they wouldn't be exercised if they did.