5. Growth options Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Consider the case of Mitata Co.: Mitata Co. is considering a three-year project that will require an initial investment of $30,000. It has estimated that the annual cash flows for the project under good conditions will be $50,000 and $11,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. (Note: Do not If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is round intermediate calculations and round your answer to the nearest dollar.) Mitata Co. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are good, the firm will be able to invest $2,000 in year 2 to generate an additional cash flow of $15,000 in year 3. If conditions are bad, the firm will not make any further investments in the project. Using the information from the preceding problem, the expected NPV of this project-when taking the growth option into account is (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) Mitata Co.'s growth option is worth (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) (Note: Do not If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is round intermediate calculations and round your answer to the nearest dollar.) $51,224 Mitata Co. wants to take a potential growth option into account when calculating the project's expected NPV. If condit $48,663 od, the firm will be able to invest $2,000 in year 2 to generate an additional cash flow of $15,000 in year 3. If conditions are bad, the firi nake any further $38,418 investments in the project. $56,346 Using the information from the preceding problem, the expected NPV of this project,when taking the growth option into account,is (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) Mitata Co.'s growth option is worth (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) (Note: Do not If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is round intermediate calculations and round your answer to the nearest dollar.) $73,477 be $56,521 Mitata Co. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are good, ti able to invest $2,000 in year 2 to generate an additional cash flow of $15,000 in year 3. If conditions are bad, the firm will not make $64,999 investments in the project. $70,651 Using the information from the preceding problem, the expected NPV of this project-when taking the growth option into accountis (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) Mitata Co.'s growth option is worth (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) round intermediate calculations and round your answer to the nearest dollar.) $5,032 Mitata Co. wants to take a potentia ption into account when calculating the project's expected NPV. If conditions are good, the firm will be able to invest $2,000 in year 2 to 9 $6,356 h additional cash flow of $15,000 in year 3. If conditions are bad, the firm will not make any further investments in the project. $5,297 Using the information from the pred $5,562 blem, the expected NPV of this project-when taking the growth option into account is (Note: Do not round intermediate s and round your answer to the nearest dollar.) $6,092 Mitata Co.'s growth option is worth (Note: Do not round intermediate calculations and round your answer to the nearest dollar.)