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hi John
could you please explain why in the answer for Pe is not used discounted exercise price $35m? In my understanding $35m in 2 years time will not have same value as today?
When calculating the option price (whether it be share options or real options) the Pe is always the actual exercise price (which will always be payable at a future date).
The part of the formula with ‘e’ in it, is actually discounting it (it is continuous discounting as opposed to the normal yearly discounting, which is why the ‘e’ is there).
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