The Owner of a Pro-Football Team Expects the Team to Be

Multiple Choice

The owner of a pro-football team expects the team to be worth either $270 million next year or $120 million, depending on whether or not she gets the city to build a new stadium. There is a 60 percent chance she will get a new stadium. There is a buyer willing to pay $180 million for the team right now. However, the buyer will keep his offer open-until the stadium issue is resolved-if offered some form of compensation. If the interest rate is 6 percent, how much should she be willing to pay the potential buyer for a one-year option to sell the team (round to the nearest $1 million) ?

A) 0
B) $40 million
C) $42 million
D) $21 million