Newstead Metals is a small manufacturing plant that currently generates revenues of $4 million per year. Next year, depending on the shift in government policies, its revenues will either increase by 30% or decrease by 35%, with equal probability, and stay at that level as long as the plant is operating. Other costs run $2.50 million per year. The owner can sell the plant at any time to a large conglomerate for $6 million and Newstead Metals cost of capital is 5%.

Given the embedded option to sell the plant, the value of Newstead Metals will be closest to:

A.

$28.0 million.

B.

$45.0 million.

C.

$30.0 million.

D.

$54.0 million.