Unformatted text preview: no cash payment right now.) What is the value of this 5% in the completed project for seller? (Use any approach you prefer.) 2. What’s the value of this “option to delay” (net of cost) for CPL? Use two approaches: Black-Scholes Model and binomial tree method assuming one quarter as a step. 3. Should you suggest Mr. Yung to accept the offer from the seller? 4. Will your above answers change if seller asks for 18% of the stake instead of 5%? 5. One of your team members suggests that CPL bargain hard with the seller for a better option that is not only exercisable at the end of one year, but also exercisable at the end of each quarter in the one year period. What’s the value of this new option (assume the seller asks for 5% of the stake)? Should CPL bargain hard to get this new option instead of the proposed one?...
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- Spring '09
- Valuation, Real options analysis, Mathematical finance, Myron Scholes, Mr. Larry Yung, CITIC Group