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% chance she will get a new stadium.There is a buyer willing to pay $175 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.Given a discount rate of 7%,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) $21 million
C) $42 million
D) $55 million