You$$re planning to outsource $60\%$ of your manufacturing function to a

lower cost location sometime in the next six months. Suppose the value

of the plant today is $100$m$.$ Your plan is to economise $20$m from

outsourcing. Risk uncertainty in the operating environment is estimated

by a semi$-$annual variance of $12\mathrm{.}5\%$ in cash flows. The risk$-$free rate of

return is $4\%$ per half annum. Use the binomial option pricing approach

with a time step of three months to value the option to outsource

operations. Is there an optimal time for taking such an action? Explain.

I am mainly unsure about the $60\%$ outsourcing and economising the $20$m features mentioned in the question. Is $60\%$ of $100$ the strike? If so$,$ where does the $20$m come in$?$