H7a-3. Use a decision tree to model Trip Logistics' option to not sign a lease and thus get all warehousing space from the spot market as needed with the following modifications: ' The planning horizon is 2 years (not 3 as used in our book) ' 1000 sq. ft. of warehouse space needed for 1000 units of demand ' Current demand = 100,000 units per year Binomial uncertainty: Demand (D) can go up by 15% with probabilityp = 0.5 or down by 10% with 1 p = 0.5 ' Lease price = $1.00 per sq. ft. per year Hint: the decision tree should look like this; then add the payoffs and compute the expected NPV of not ' Spot market price (S) = $1.20 per sq. ft. per year signing the lease. ' Spot prices can go up by 10% withp = 0.5 or down by 7% with 1 p = 0.5 D=1 15, S=$1.32 ' Revenue = $1.22 per unit of demand 25 ' k: 0.05 (rate of return) D=115, S=$1 116 D=100,S=$1 20',\" 25 _ _ _ |k=0 05 I D=90, 3:31 32 What Is the expected NPV of not Signlng the lease? 25 What is the expected NPV if the rate of return k = 0.10? 0'90' 32551'116 That is, evaluate the decision tree with k0.10