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.