Using two step binomial pricing model

Assignment Help Financial Management

Reference no: EM132062692

1. The current stock price is $55. The price a year from today will be either 35 or 95 with equal probabilities. the investior can borrow at 7%. Using two step binomial pricing model, the value of one year of the option with a strike price of 75$ should be?

2. Shawn Paschal has been working on an advanced technology for use in the green fuel production at King Fisher Aviation. He is almost finished with the technology and anticipates the first cash flow from the technology to be $200,000 received 2 years from today. Subsequent annual cash flows will grow at 4.5 percent in perpetuity. Evaluate the technology proposed by Shawn Paschal. What is your recommendation on the adoption of this technology? Explain your reasoning.

Reference no: EM132062692

Questions Cloud

Difference in npvs between the make and buy options : Calculate the difference in NPVs between the Make and Buy options. Express all costs as positive values in your calculations.

What the reason is for the high rate quote on the loan : Using the interest rate model determine what the reason is for the high rate quote on the loan

Calculate the company cash outlays : Sales for the first quarter of the next year are projected to be $1,500. Calculate the company's cash outlays,

Worth of common equity : The balance sheet reports that they currently have $22 million worth of long-term debt and $18 million worth of common equity.

Using two step binomial pricing model : Using two step binomial pricing model, the value of one year of the option with a strike price of 75$ should be?

The foreign exchange risk involved in foreign trade : Discuss the techniques that a company might use to hedge against the foreign exchange risk involved in foreign trade.

Differences between employee and independent contractor : What are the differences between an employee and an independent contractor?

Discount rate of return and the investment rate of return : What is the difference in basis points between the discount rate of return (DR) and the investment rate of return

Contrast investment portfolio of two very different investor : Compare and contrast the investment portfolio of two very different investors.

User Account

All Pages