A pharamaceutical company MD is considering a project with an up-front cost at t = 0 of $1000. The project's subsequent cash flows are dependent on the Food and Drug Administration. There is a 70% chance that the competitive product will be rejected by the FDA, in which case MD's expected cash flows will be $500 at the end of each of the next three years. There is a 30% chance that the competitor's product will be approved, in which case the expected cash flows will be only $25 at the end of each of the next three years. MD will know about the FDA decision one year form today. The WACC is 8%. Find NPV of the project if MD decides to invest now. MD is considering whether to make the investment today or to wait a year to find out about the FDA's decision. If it waits a year, the project's up-front cost at t = 1 will remain at S1,000, the subsequent cash flows will remain at $500 per year if the competitor's product is rejected and $25 per year if the alternative product is approved The risk free rate is 2%. The WACC is 8%. Find the NPV of the project if MD decides to wait one year to invest. Should MD exercise its option to wait? Why or why not? Explain using your findings in parts a and b. Monte Carlo simulation uses a computer to generate random sets of inputs, those inputs are then determine a trial NPV, and a number of trial NPVs are averaged to find the project's expected NPV. Brief explain how is Monte Carlo simulation different from sensitivity and scenario analyses