Boisjoly Enterprises is considering buying a vacant lot for an after-tax cost of $1.4 million. If the property is purchased, the company's plan is to invest another $5 million after taxes today (t = 0) to build a hotel on the property. The after-tax cash flows from the hotel will depend critically on whether the state imposes a tourism tax in this year's legislative session. If the tax is imposed, the hotel is expected to produce after-tax cash flows of $500,000 at the end of each of the next 15 years. If the tax is not imposed, the hotel is expected to produce after-tax cash flows of $1,200,000 at the end of each of the next 15 years. The project has a 12% WACC. Assume at the outset that the company does not have the option to delay the project. a. What is the project's expected NPV if the tax is imposed? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ b. What is the project's expected NPV if the tax is not imposed? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ c. Given that there is a 55% chance that the tax will be imposed, what is the project's expected NPV if management proceeds with it today? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ d. Although the company does not have an option to delay construction, it does have the option to abandon the project 1 year from now if the tax is imposed. If it abandons the project, it will sell the complete property 1 year from now at an expected price of $6 million after taxes. Once the project is abandoned, the company will no longer receive any cash flows. Assuming that all cash flows are discounted at 12%, will the existence of this abandonment option affect the company's decision to proceed with the project today? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ -Select- e. Finally, assume that there is no option to abandon or delay the project, but that the company has an option to purchase an adjacent property in 1 year for an after-tax investment of $1.9 million (outflow at t = 1). If the tourism tax is imposed, the expected NPV of developing this property (as of t = 1) will be only $400,000 (so it doesn't make sense to purchase the property for $1.9 million after taxes). However, if the tax is not imposed, the expected NPV of the future opportunities from developing the property will be $4 million (as of t = 1). Thus, under this scenario, it makes sense to purchase the property for $1.9 million after taxes (at t = 1). Assume that these cash flows are discounted at 12%, and the probability that the tax will be imposed is still 55%. What is the most the company would pay today (t = 0) for the $1.9 million purchase option (at t = 1) for the adjacent property? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $

Doisfoly Enterprises is eansidering buying a vacant lot fot an atter-tax cost of $1.4 million. If the property is purchased, the company's plan is to invest anceher $5 million atter taxes today (t0) to build a hotel on the property. The after-tax cash flows from the hotel will depend critically on whether the state imposes a tourism tax in this year's legislative session. If the tax is imposed, the hotel is expected to produce after-tax cash flows of $500,000 at the end of esch of the next 15 years. If the tax is not imposed, the hetinl is expected to produce atter-tax cach fows of $1,200,000 at the end of each of the next 15 years. The project has a 12% wACC. Assume at the cutset that the company dees not have the aption to delby the project. a. What is the project's expected NPV if the tax is imposed? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nogrest cent. 5 b. What is the project's expocted NFV if the tax is not imposed? Negative value, if any, should be indicated by a minus sign, Do not round intermediate calculations. Round your answer to the nearest cent. s C. Gven that there is a SS\% chance that the tax wall be imposed, what is the project's expected NPV if management proceeds with it today? Negative value, if any, ihould be indicated by a minus sign, Do not round intermediate calculations, Round your answer to the nearest cont. d. Although the company does not have an option to delay construction, it does have the cotion to abandon the project i year trom now if the tax is imposed, If it abandons the project, it will sell the complete property 1 year from naw at an expected price of 56 million after taxes. Once the project is abandoned, the company will mo lenger receive any cash fiows. Assuming that all cash flows are discounted at 12%, wil the existence of this abandonment option affect the company's declsion to procetd with the project today? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. 1 e. Finallk, assume that there is no option to abandon or delay the project, but that the company has an option to purchase an adjacent property in 1 year for an aftur-tax invessment of $1.9 milion (outflow at t=1 ). If the tourism tax is imposed, the expected NPV of developing this property (as of t=1 ) will be only s400,000 (so it doesnt make sense to purchase the property for $1.9 million after taxes). Honever, if the tar is not imposed, the expected NpV of the future opportunities from developing the property will be $4 milion (es of t=1 ). Thus, under this scenario, it makes sense to purchase the property for $1.9 million after taxes (at t=1 ). Assume that these cash flows are discounted at 12\%, and the probability that the tax will be imposed is still 55%. What is the most the company would pay today ( t - 0 ) for the $1.9 milion purchase option (att=1 ) for the adjacent propertv? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round yout answer to the nearest cent. 3