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AVEM COMPANY BPP EXAM KIT QUESTION 21

This topic has 1 reply, 2 voices, and was last updated 11 months ago by John Moffat.

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February 22, 2022 at 8:23 pm #649141
shaunak22
Participant
- Topics: 218
- Replies: 41
Lumi Co, a leisure travel company, has offered $50 million to buy the project from Fugae Co at
the start of the second year. Fugae Co is considering whether having this choice would add to the value of the project
DOUBT – HERE WE HAVE A CHOICE WHETHER TO SELL THE COMPANY OR NOT SINCE THE OFFERES A REAL PUT OPTION SHOULDN’T WE VALUE THE COMPANY USING BLACK SCHOES MODEL?
i have seen the recoding of this question being solved by you in that question to evaluate whether you need to sell this or not you have made a decision tree and made a lot of ither calculation>
February 23, 2022 at 11:49 am #649197
John Moffat
Keymaster
- Topics: 56
- Replies: 51583
We do not have the information available to be able to use Black Scholes.
It is decision making under uncertainty just as in Paper PM.
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