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 wigslis $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 $6,000 per year for 2 years. Fethe's cost of capital is 10%. 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 4%. Select the correct decision tree. A B 4 = 4% 0 1 2 3 20.000 23.000 23.000 23000 23000 20,000 (1 = 10%) 40% Pob Good = 10% 0 1 2 3 20.000 6000 6000 8.000 6000 20.000 (e = 45) 40% Prob Good Bad 00% Probe 0 Bad 60% Probe 20.000 23.000 23.000 0 0 8.000 20.000 6.000 2 3 4 r = 10% 0 1 40% Prob/- 20.000 23,000 23.000 23,000 23,000 Good - 20,000 (r = 48 40% Prob Good T= 10% 0 1 2 3 4 20,000 23000 23000 23000 23,000 - 20,000 (r = 4%) Bad 60% Prob Bad 60% Prob 0 0 - 20,000 6.000 6.000 20,000 6,000 6.000 6.000 6.000 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, $