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 cast for a 2-year tranchise to sell the wigs is $20,000. If demand is good (40% probability), then the net cash flows will be $25,000 per year for 2 years. If demand is bod (60% probability), then the net cash flows will be $4,000 per year for 2 years. Fethe's cost of capital is 14%. Do not found intermediate calculations 3. 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 7% Select the correct decision tree 40% Prob Good 7 0 1 2 20.000 25000 25000 25000 25000 20.000(r = 149) 40% Pob Good IN 1 2 3 20.000 4000 4000 4000 4000 20.000 (7) Bad 60% Prob 60% Prob 20.000 4000 4000 0 0 20 000 25000 25000 0 0 D 40% Pob Good 0 1 2 20.000 28.000 25000 25000 25000 20.000 (1 = 7%) 40% Pob Good T14 2 20.000 25000 25000 25000 25000 - 20.000 (1 = 7) Bad 60% Prob Bas 60% POD - 20000 4000 4000 4000 4000 20.000 4.000 4000 0 0 50 80% Pro Bad 50% Pob 20.000 4000 4000 4000 4000 20.000 4000 4000 0 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. $