B. Jamie Williams the project manager of Arc Systems Ltd is evaluating a proposal to install solar panels on the roof of its factory. The panels will cost $150,000 per set. Depending on the price of electricity and the efficiency of the panels, the project will increase operating cash flows by either $50,000 per year or $75,000 per year. The useful life of the panels is 5 years. If early results indicate savings of $75,000 per year, four additional sets of panels will be installed immediately at the same cost with the same projected savings. The probability of either outcome is 50%. Use a discount rate of 10%. Compute: i. the expected NPV of the project if the option to expand is not considered. (3 marks) ii. iii. the expected NPV of the project if the option to expand is considered. Why is it important to consider real options in the capital budgeting process? Give one specific example. (5 marks) (2 marks)