am. 336. Yardie Global is considering expanding a cruise line division next year (t-1) or waiting a yeardue to public health concerns. The cruise line has a discount rate of 11 percent and has anNPV today (t=0) of $40M. If they wait one year for market research, there is a 30 percentchance that the NPV next year (t=1) could be $150M and 70 percent chance that they will sellthe division for $2M.The company can consider the option to sell the division as similar totaking a long position on a put option with a strike price equal to $2M.taking a long position on a call option with a strike price equal to $40M.taking a long position on a call option with a strike price equal to $2M.

Call option gives the opportunity to the buy the assets at given prices but there is no obligation…

Yardie Global is considering expanding a cruise line division next year (t=1) or waiting a y due to public health concerns. The cruise line has a discount rate of 11 percent and has a NPV today (t=0) of $40M. If they wait one year for market research, there is a 30 percent chance that the NPV next year (t=1) could be $150M and 70 percent chance that they wi the division for $2M. The company can consider the option to sell the division as similar to O taking a long position on a put option with a strike price equal to $2M. taking a long position on a call option with a strike price equal to $40M