Use a Binomial Tree to Value the Following Option

question 19

Multiple Choice

Use a binomial tree to value the following option. Assume r_f = 0.04, r_p =0.12, σ = 0.35, E(CF₁) = $30, and cost = $300. What is the value of this project option?

• A) $40.74
• B) $50.60
• C) $55.32
• D) $62.12