The chief investment officer (CIO) of a large investment company is considering a major investment to build and operate a private inner-city housing project. The housing project would require an initial investment of $300 million. The project is expected to generate positive cash flows with a present value of $310 million. In order to encourage the project, the municipal government has agreed that the investment company can sell the project back to the municipality without recourse for $200 million after four years. The CIO asked her financial analytical team to calculate the net present value of the housing project with the municipality repurchase option. Using the Black-Scholes option pricing model, the team determined the real option value to be $10.81 million. Based on this, the overall value of the project and the type of option is

a) b) Overall value $210.81 million $120.81 million $-0.81 million $20.81 million Type of option Put option Call option Call option Put option c) d)