4. Use the following information (from Higgins Ch 3, #18) to answer the following questions Wind Resources (WRI) is contemplating developing an attractive wind farm site it owns in Southern California. A consultant estimates that at the current natural gas price of 6 cent/kWh, immediate development will yield a profit of $10 million. However, natural gas prices are volatile. Suppose the price in one year will be either 8 cents/kWh or 4 cents/kWh with equal probability. According to the consultant WRI's profit will either jump to $30 million or fall to $10 million. Because the company won't receive these profits for one year, discount them to the present at 25%. WRI is now considering whether to wait to develop the wind farm. Draw a decision tree What should WRI do? What is the NPV of the project? What is the value of the option to wait? Suppose the price in one year will be either 12 cents/kWh or 2 cents/kwh with equal probability. According to the consultant WRI's profit will either jump to $60 million or fall to -$30 million What is the new value of the option to wait