Gasworks, Inc., has been approached to sell up to 3.4 million gallons of gasoline in three...

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Gasworks, Inc., has been approached to sell up to 3.4 milliongallons of gasoline in three months at a price of $2.80 per gallon.Gasoline is currently selling on the wholesale market at $2.70 pergallon and has a standard deviation of 59 percent.
If the risk-free rate is 5 percent per year, what is the valueof this option? Use the two-state model to value the real option.(Do not round intermediate calculations and enter your answer indollars, not millions of dollars, rounded to 2 decimal places,e.g., 1,234,567.89.)

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It is assumed that the underlying asset in this case is Gasoline and the firm gets the option to sell the underlying asset after a fixed amount of time the See Answer

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Gasworks, Inc., has been approached to sell up to 3.4 milliongallons of gasoline in three months at a price of $2.80 per gallon.Gasoline is currently selling on the wholesale market at $2.70 pergallon and has a standard deviation of 59 percent.If the risk-free rate is 5 percent per year, what is the valueof this option? Use the two-state model to value the real option.(Do not round intermediate calculations and enter your answer indollars, not millions of dollars, rounded to 2 decimal places,e.g., 1,234,567.89.)