finance- real options

ioisjoly Enterprises is considering buying a vacant lot for an after-tax cost of $1.3 milion. If the property is purchased, the company's plan is to invest another $6 miltion after taxes bday (t=0) to build a hotel on the property. The after-tox cash flows from the hotel will depend critically on whether the state imposes a tourism tax in this year's legisiative ession. If the tax is imposed, the hotel is expected to produce afer-tax cash flows of $500,000 at the end of each of the next 15 vears. If the tax is not imposed, the hotel is ixpected to produce after-tax cash fows of $1,400,000 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 he option to deloy the project. a. What is the project's expected NprV it 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. 5 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. 3 c. Given that there it a so\% chance that the tax wil be imposed, what is the project's expected NPV if management proceeds with it todar? Negatve value, if any, should be indicated by a minus sign. Do not round intermediste calculations. Round your ansere to the nearest cent. 3 d. Although the company does not have an option to delar construction, it does have the option to abandon the profect 1 year from now if the tax is imposed. If it abandons the project, it will selt the complete property 1 year from now ot an expected price of $7 miltion offer taxes once the project is abandoned, the company will no longer receive any cash flows. Assumhe that all cash flows are discounted at 12%, will the exidtence of this abandonment opton affect the company's decisien to proceed with the project today? Negative value, if any, should be indicated by a minus sign, Do not found intermediate calculations, Round vour answer to the nearest cent. 5 e. Finally, assume that there is no option to abandon or delay the project, but that the company has an optien to purchase an odjacent property in I year for an after-tax make sense to purchase the property for 51.8 mison after tuxts). Hontvec, if the tax is not impored, the expected NpV of the future opportunaties from developing the amwer to the neares cent. 1