Question
Consider again the Sport Hotel example and Example 9.1. Suppose that if the franchise is accepted the value of the hotel is not $8 million
Consider again the Sport Hotel example and Example 9.1. Suppose that if the franchise is accepted the value of the hotel is not $8 million but instead $8.50. Everything else, including first year expenses, is the same as shown in the example. Incorporating the real option, what probability of the franchise being granted would represent a "fair investment?" (that is, a probability such that any higher value would create a positive expected value) % Place your answer in percentage form with at least 2 decimal places. For example, and answer of fifteen point four three percent would be entered 15.43.
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