On May 25, 2018 you purchased an option which will allow you to sell a commercial building on August 14, 2022 for $42 million. Your current estimate of the value of the commercial building is $38 million. The annual volatility for the change in the commercial building’s value is 57% and the risk-free rate is 6%. What type of option is this? Calculate the value of the option to sell the commercial building. Please show work in excel and equations/questions used.
On May 25, 2018 you purchased an option which will allow you to sell a commercial building on August 14, 2022 for $42 million. Your current estimate of the value of the commercial building is $38 million. The annual volatility for the change in the commercial building’s value is 57% and the risk-free rate is 6%. What type of option is this? Calculate the value of the option to sell the commercial building. Please show work in excel and equations/questions used.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 10PB: Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce...
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On May 25, 2018 you purchased an option which will allow you to sell a commercial building on August 14, 2022 for $42 million. Your current estimate of the value of the commercial building is $38 million. The annual volatility for the change in the commercial building’s value is 57% and the risk-free rate is 6%.
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- What type of option is this?
- Calculate the value of the option to sell the commercial building.
Please show work in excel and equations/questions used.
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