You own a small manufacturing plant that currently


You own a small manufacturing plant that currently generates revenues of $2 million per year. Next year, based upon a decision on a long-term government contract, your revenues will either increase by 20% or decrease by 25%, with equal probability, and stay at that level as long as you operate the plant. Other costs run $1.6 million dollars per year. You can sell the plant at any time to a large conglomerate for $5 million and your cost of capital is 10%. What is the value of the option to sell the plant?

Request for Solution File

Ask an Expert for Answer!!
Financial Management: You own a small manufacturing plant that currently
Reference No:- TGS01416661

Expected delivery within 24 Hours