ATTEND THE QUESTION ONLY IF YOU CAN SOLVE BOTH THE QUESTIONS. AWARE OF CHEGG POLICIES SO DO NOT SAY ONLY ONE CAN BE DONE.

ANSWER BOTH OR MAKE WAY TO OTHERS TO ANSWER.

WILL REPORT THE ANSWER IF ONE IS ANSWERED.

Fethe's Funny. Hats is considering selling trademarked, orange-haired curly wigs for University of Tennessee footboll games. The purchase cost for a 2 -year franchise sell the wigs is $20,000. If demand is good (40\% probability), then the net cash flows will be 325,000 per year for 2 years. If demand is bad ( 60%. probability), then the net cash flows will be $5,000 per year for 2 years. Fethe's cost of capital is 10%. 3. What is the expected NFV of the project? Round your answer to the nearest dollar, b. If Fethe makes the investment today, then it will have the option to renew the franchise fee for 2 more years at the end of Year 2 for an addibional payment of 520,000 . In this case, the cash flows that occurred in Years 1 and 2 will be repeated (so if demand wes good in Years 1 and 2 , it will continue to be good in Years 3 and 4). Use the Biack-Scholes model to estimate the value of the option. Assume the variance of the project's rate of return is 0.3721 and that the risk-free rate is 7\%. Do not round intermediate colculations. Round your answers to the nearest dollar Use computer software packages, such as Minitab or Excel, to solve this problem. Value of the growth option: 5 Value of the antire project: 5 Clark Explorers, inc, an engineering frm, has the following capital structure: Int Jsing market value and book value (separately, of course), 1nd the adjusted wacc for Clark Explorers an the following tex rates: \begin{tabular}{|l|r|r|r|} \hline & \multicolumn{1}{|c|}{ Equity } & Preferred Stock & \multicolumn{1}{c|}{ Debt } \\ \hline Market Price & 101.35 & 152,17 & 914.35 \\ \hline Outstanding units & 122,000 & 7,000 & 6,311 \\ \hline Book value & 3,396,000 & 1,167,000 & 6,311,000 \\ \hline Cost of capital & 14.53% & 11.26% & 8.30% \\ \hline \end{tabular} a. 35% b. 30% c. 20% d. 10%