The Opportunity to Invest in a Project Can Be Thought

question 34

Multiple Choice

The opportunity to invest in a project can be thought of as a two year option on an asset which is worth $400 million (PV of the cash flows from the project) with an exercise price of
$600 million (investment needed) . Calculate the value of the option given that N(d1) = 0.6 and
N(d2) = 0.4 and interest rate is 6%.

• A) $26.4 million
• B) Zero
• C) $200 million.
• D) None of the above.

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Definitions:

Erythrocytes

Red blood cells that carry oxygen from the lungs to the body tissues and carbon dioxide from the tissues back to the lungs.

Nuclei

The plural of nucleus, referring to the membrane-bound organelles that contain the genetic material in eukaryotic cells.

Mammalian

Pertaining to mammals, a class of warm-blooded animals characterized by the presence of mammary glands, which females use to feed their young.

Vertebrates

Animals with a backbone or spinal column, which includes fish, amphibians, reptiles, birds, and mammals.