5. Real Options Jet Black is an international conglomerate with a petroleum division and is currently competing in an auction to win the right lo drill for crude oil on

a large piece of land in once year. The current market price of crude oil is $60 per barrel and the land is believed to contain 495,000 barrels of oil. If found, the oil would cost$70 million to extract. Treasury bills that mature in one year yield a continuously compounded interest rate of 4percent and the standard deviation of the returns on the price of crude oil is 50 percent. Use the Black-Scholesmodel to calculate the maximum bid that the company should be willing to make at the auction.