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 seli 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 13%. 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: s 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 fows 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. The correct graph is Use decision-tree analysis to calculatio the expected NPV of this project, inciuding 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. $ 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 seli 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 13%. 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: s 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 fows 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. The correct graph is Use decision-tree analysis to calculatio the expected NPV of this project, inciuding 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. $