Jet Black is an international conglomerate with a petroleum division

and is currently competing in an auction to win the right to drill for crude oil on

a large piece of land in one year. The current market price of crude oil is $93 per

barrel, and the land is believed to contain 435,000 barrels of oil. If found, the oil

would cost $75 million to extract. Treasury bills that mature in one year yield a

continuously compounded interest rate of 4 percent, and the standard deviation

of the returns on the price of crude oil is 50 percent. Use the Black-Scholes model

to calculate the maximum bid that the company should be willing to make at the

auction.