Question
1- As the owner of the Crickley Hall building, currently valued at $ 4 million, you are concerned about the potential price risk your real
1- As the owner of the Crickley Hall building, currently valued at $ 4 million, you are concerned about the potential price risk your real estate is exposed to. You plan on retiring 5 years from now and you intend to sell Crickley Hall at $ 5 million at that time to set up a pension annuity. Other real estate properties near Crickley Hall are expected to experience volatility of 50%. The risk-free rate is 5%. How much do you need to pay to buy a put option on the Crickley Hall? Express your answer in millions of dollars with 2 decimals.
2- A company's D/E ratio is 25%. If the cost of debt is 4% and the WACC is 7.2%, what is the cost of equity? Express as a % with 2 decimals
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