Gasworks, Inc., has been approached to sell up to 5 million gallons of gasoline in three months

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Gasworks, Inc., has been approached to sell up to 5 million gallons of gasoline in three months at a price of $1.95 per gallon. Gasoline is currently selling on the wholesale market at $1.76 per gallon and has a standard deviation of 58 percent. If the risk-free rate is 6 percent per year, what is the value of this option?

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Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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