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 $28,000 per year for 2 years. If demand is bad (60% probability), then the net cash flows will be $4,000 per year for 2 years. Fethe's cost of capital is 12%. 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. 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 6% Select the correct decision tree. 40% Pob Good Bad 60% Prob 40% Pob Good Ba 80% Pro = 12% A 0 20 000 28000 28000 28000 28000 20.000 (6%) -20 000 4000 4000 125 C 0 0 20.000 4000 4000 4000 4000 - 20,000 (65) 30.000 28.000 28000 0 O 40% Prob Good BA 60% Prob 40% Pob Good Bad 00% P 7=6% 20.000 28000 28000 28.000 28.000 20.000 (12%) -20.000 4000 4000 0 1 20.000 28000 28000 28000 28.000 -20.000 (0%) 30000 4000 4000 4000 4000 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 6%. Select the correct decision tree. 40% Prob Good Bad 60% Pro 40% Prob Good Bad 60% Prob B T= 12% 0 A 2 20.000 28000 28.000 28.000 28.000 20.000 (6%) -20000 4000 4.000 12% C 0 3 20.000 4000 4000 4000 4000 20.000 (6%) 20.000 28.000 28.000 0 0 40% Prob, Good Bad 60% Prob 40% Prob Good Bad 60% Prob B 1=65 0 (3 20.000 28000 28000 28000 28.000 20.000 (12%) 20000 4000 4.000 20.000 4000 D 0 0 =12% 0 3 T 2 20.000 28000 28000 28000 28.000 20 000 (r = 6%) 4000 4000 4000 The correct graph is set 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