The Owner of a Pro-Football Team Expects the Team to Be

question 51

Multiple Choice

The owner of a pro-football team expects the team to be worth either $270 million next year or $120 million,depending on whether or not she gets the city to build a new stadium.There is a 60% chance she will get a new stadium.There is a buyer willing to pay $175 million for the team right now.However,the buyer will keep his offer open-until the stadium issue is resolved-if offered some form of compensation.Given a discount rate of 7%,how much should she be willing to pay the potential buyer for a one-year option to sell the team (round to the nearest $1 million) ?

• A)0
• B)$21 million
• C)$42 million
• D)$55 million

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Definitions:

Imports

Goods and services purchased from other countries to be sold or used domestically.

Exports

Exports refer to goods or services produced in one country and sold to buyers in other countries, contributing to the exporting country's economy.

Outsourcing

The business practice of hiring a party outside a company to perform services or create goods that traditionally were performed in-house by the company's own employees.

Manufacturing

The activities and processes used in making tangible products; also called production.