Global Foundries (GF), a privately held company that invests in companies producing essential components for high-volume data storage, is val­ued at $4.0 billion dollars. A computer company that wants to get into cloud computing is consid­ering the purchase of GF, but because of the un­certain economy, it would prefer to purchase an option that will allow it to buy the company for up to 1 year from now at a cost of $4.3 billion. What is the maximum amount the company should be willing to pay for the option if its MARR is 9% per year?

What will be an ideal response?


In $ billion units,
PWoption = 4.0 – 4.3(P/F,9%,1)
= 4.0 – 4.3(0.9174)
= $0. 05518 ($55.18 million)

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