Gasworks inc has been approached to sell up to 44 million, Ask an Expert

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Gasworks, Inc., has been approached to sell up to 4.4 million gallons of gasoline in three months at a price of $3.55 per gallon. Gasoline is currently selling on the wholesale market at $3.20 per gallon and has a standard deviation of 60 percent.

If the risk-free rate is 4 percent per year, what is the value of this option? Use the two-state model to value the real option. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Value of contract $

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Financial Management, Finance

Category:- Financial Management
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