Suppose you have negotiated with WonderDishwasher Ltd to sel…
Suppose you have negotiated with WonderDishwasher Ltd to sell their top-of-the-art 100% Solar Energy Dishwashers. The contract terms specify that you must open the dealership immediately or in exactly one year; if you do neither, you lose the right to open the dealership. You have the following information available: 1) It cost €7,5 Million to open the dealership. 2) If you open the dealership immediately, you expect it to generate €300,000 from the first year with a growth rate of 1% 3) The cost of capital for this investment is 6% 4) Assume: a. The Risk-free interest rate is 5%. b. The volatility of this business is 40% c. If you wait to open the dealership, you have an opportunity cost of €300,000 Requested: How much you should pay for this opportunity? Explain in detail all your calculus and assumptions. Recall: Black-Scholes formula: Where S is the current price for the Stock, PV K() is the present value (price) of a risk-free zero-coupon bond that pays K on the expiration date of the option, N d() is the cumulative normal distribution and: (25 Marks)