Question: I don't know how to solve this problem Valuing an American Option PROBLEM 12-5: Valuation an American Option Given Risk-neutral probability Risk free Interest rate

I don't know how to solve this problem Valuing an American Option

I don't know how to solve this problem Valuing an American Option

PROBLEM 12-5: Valuation an American Option Given Risk-neutral probability Risk free Interest rate Discount factor = exp(Risk free interest rate) Strike (in $ millions) 0.4626 5% $ 23.00 Solution Today Year One Year Two Year Three $ $ Text Color Legend Value of Beginning Oil Field Operations Now $ NPV of waiting (NPV-Waiting) NPV of Exercising Now (NPV-Now) Value of American Option = max (NPV-Waiting,NPV-Now) $ $ 14.5700 31.7800 28.1900 25.000 19.6600 $ $ 26.5500 $ $ 35.8300 23.5500 20.8800 Cell Outline Legend $ 17.4400 Stock Wait Exercise a. Solution Legend = Value given in problem = Formula/Calculation/Analysis required = Qualitative analysis or Short answer required = Goal Seek or Solver cell = Crystal Ball Input = Crystal Ball Output

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