Change for purchaser of put option to break even in one year

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Reference no: EM132050784

Killmonger Healthcare has forecasted the following EBITs and associated probabilities:

$-61 million (15% probability)

$33 million (30% probability)

$136 million (55% probability)

Considering that Killmonger has:

8.23 million shares outstanding trading currently trading at $13.69

$64 million in debt (market value)

A 34% tax rate

What is the expected ROIC?

2. 3. A stock is selling today for $100. The stock has an annual volatility of 45 percent and the annual risk-free rate is 12 percent.

a. Calculate the fair price for a 1 year European call option with an exercise price of $80.

b. Calculate how much the current stock price would need to change for the purchaser of the call option to break even in one year.

c. Calculate the fair price for a 1 year European put option with an exercise price of $80.

d. Calculate how much the current stock price would need to change for the purchaser of the put option to break even in one year.

e. Calculate the level of volatility that would make the $80 call option sell for $40. (Use Goal Seek or Solver).f.

i. Calculate the level of volatility that would make the $80 put option sell for $15. (Use

Goal Seek or Solver).

Reference no: EM132050784

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