9. You can acquire an existing business for $2 million. You are uncertain about future demand. There is a 40 percent chance of high demand, in which case the present value of the business will be $3 million. There is a 25 percent chance of moderate demand, and the associated present value is $1.5 million. Finally, there is a 35 percent chance of low demand, in which case the present value is $1 million. Draw a decision tree for this problem. What is the expected net present value of the business? Should you invest? Explain.

10. Suppose that if you buy the business described in Question 9, you can expand the business by investing another $500,000 after you learn the true future demand state. This would make the present value of the business $4 million in the highdemand state, $2.5 million in the moderate demand state, and $1.0 million in the low demand state. Draw a decision tree to reflect the option to expand. Evaluate the alternatives. What is the net present value of the business if you consider the option to expand? How valuable is the option to expand?

11. Consider Question 9 again, and suppose that the market value of the assets of the business would have a present value of $1.8 million if the business were to be liquidated after the true demand state is known. Draw a decision tree to reflect the abandonment option. Evaluate the alternatives. What is the net present value of the business if you consider the abandonment option? How valuable is the option to abandon?

12. Finally, reevaluate the investment opportunity in Question 9, incorporating both the expansion opportunity from Question 10 and the abandonment option from Question 11. Draw the decision tree incorporating both options. Are the values of the expansion and abandonment options additive? Why or why not? I ONLY NEED HELP WITH QUESTION 11 & 12!