Question

Hi im reading a corporate finance: theory and practice.
at chapter 28 pag 771 has a exemple of valuation of financial flexibility. i cant understand why the variance is Ln(Net capital expenditure).
S=Annual Net capital expenditure as percent of firm value*(1+excess return)
K=Annual Net capital expenditure as percent of Firm Value
t=1 year
variance=variance in Ln(net capital expenditure)
y=annual cost of holding Cash or maintaining excess Debt capacity as % of firm value.