The going rate for paying a CEO in the widget industry is $1,000,000 per year.You find that the CEO of MasterWidgets has a contract that pays him $1,200,000 per year for five years if he cannot work for any other firm (for any reason during the contractual period) .What is the value of a real option for a CEO to not work for a firm other than MasterWidgets? Assume a discount rate of 10%.
A) $181,818
B) $200,000
C) $758,157
D) $1,000,000
Correct Answer:
Verified
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