If this isn't the right place for this tell me to bugger off (but please direct me to a learning/student forum if you do!) I am a high school student reading and thinking about Wall Street careers so this is not a question for a class or an interview or anything. Im teaching myself about derivatives and wondered if someone could help me think through a real world option type problem. (It's actually related to a little business I have with a friend selling stuff on Amazon.)
Anyway so I have a little business that let's say makes $500k / year. Someone wants to come in as a partner, and their ask is an option on the equity that would only trigger if someone buys our company. (I hope I'm explaining this correctly.) Say they get 25% of the buyout price if we are bought, otherwise they get nothing.
So the question is, what is that option worth? How do I think about valuing it? I understand models like BS, Monte Carlo, binomial lattice, but don't know how to apply it to an asset (our company) that has no price. The distribution is the buyout price, whether or not it happens. For sake of simplicity assume that it is a perpetual option.
Sorry if this question is annoying but I'm just trying to learn how to think about things like this. Thank you.