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3. 30 points. Your firm, ECB Inc., makes batteries for electric cars. Another firm, Milton Inc., owns a technology that produces electric car batteries more

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3. 30 points. Your firm, ECB Inc., makes batteries for electric cars. Another firm, Milton Inc., owns a technology that produces electric car batteries more efficiently. ECB holds an option to buy this technology from Milton Inc.; this option expires one year from now. This new technology is selling for $8 million today. Two possibilities exist one year from now: Demand for electric car batteries is high and the value of the new technology is $14 million; or demand is low and the value of the new technology is $7 million. The risk free rate is 5% per annum. a. Show how an investor can combine the technology and the option to have the same outcome regardless of the value of the new technology in

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