eBook Problem Walk-Through Growth Option: Decision-Tree Analysis Fethe's Funny Hats is considering selling trademarked, orange-haired curly wigs for University of Tennessee football games. The purchase cost for a 2-year franchise to sell the wigs is $20,000. If demand is good (40% probability), then the net cash flows will be $23,000 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 11%. Do not round intermediate calculations. a. What is the expected NPV of the project? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest dollar. 4: End of Chapter Problems 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 additional payment of $20,000. In this case, the cash flows that occurred in Years 1 and 2 will be repeated (so if demand was good in Years 1 and 2, it will continue to be good in Years 3 and 4). Write out the decision tree. Note: The franchise fee payment at the end of Year 2 is known so it should be discounted at the risk-free rate, which is 8%. Select the correct decision tree. 405 Pob 20.000 23000 23000 23000 23000 20.000 ( 8) - 20 000 5.000 5.000 5000 5000 40% Pb2000 2200 23000 23000 23000 - 20000 ( 8 ) 50% Pro - 20 000 5.000 5000 20000 23000 23000 23000 23000 - 20 000( 119) 50% Pro - 20 000 5000 5000 0 20000 5000 5000 5 - 20.000 ( 9) 00 Probe The correct graph is -Select- Use decision-tree analysis to calculate the expected NPV of this project, including the option to continue for an additional 2 years. Negative values, if any, should be indicated by a minus sign. Round your answer to the nearest dollar