1. Suppose that a league is contemplating expansion, and it expects the new team to finish "growing u " in its fourthyear ( t=0 to 3 ). Determine the expansionfee if, eachyear, the overall value of ownership (V) is expected to be $1,000; cost (C) (including the new owner's opportunity cost) is expected to be $700; and the interestrate (r) is 6%. Assume initially that there are neither expected impacts on the national TV contract nor local costs for current owners. - What franchise fee would we expect existing owners to charge new owners? Now suppose that addition of the expansion team will add $200 to the national TV contract (N) each year but will impose local costs (L) of $100 for all existing teams (combined) each year. - How will the franchise fee be affected? Suppose that existing owners are wrong and that the combined local costs for existing teams are much higher (say $500 ). - Does this mean that the league charged to olittle or to o much for an expansion fee? Briefly explain (and calculate what existing owners would charge). - If the existing owners properly estimated the local impacts and adjusted the fee accordingly, would the prospective new team be willing to pay the fee and join the league? Explain