Growth Option: Option Analysis

net cash flows will be $$25,000$ per year for $2$ years. If demand is bad $(60\%$ probability$),$ then the net cash flows will be $$5,000$ per year for $2$ years. Fethe's cost of capital is $10\%.$

a$.$ What is the expected NPV of the project? Round your answer to the nearest dollar.

$

that the risk$-$free rate is $8\%.$ Do not round intermediate calculations. Round your answers to the nearest dollar.

Use computer software packages, such as Minitab or Excel, to solve this problem.

Value of the growth option: $

Value of the entire project: $