Haslam Homes is considering designing and marketing a concrete, yurt-based pre-fabricated home to compete in the doomsday prepper market. Development will cost $1,000,000 and will take one year. If the yurts are popular (30% probability) the cash flows will be $500,000 per year for 5 years starting in Year 1. If the yurts are not a hit (70% probability) the cash flows will be $100,000 per year for 5 years. Calculate the ENPV of the project. Haslam's cost of capital is 10%.

Haslam realzes that if the yurts are popular, they can expand their markets into Eastern Europe by making an investment of $1 million in bribes and licenses in Year 5 after the yurt's success has been established. If Haslam makes this investment, they can expect 5 years of the same cash flows they received in Years 1-5 in the U.S. market arriving in Years 6-10. Of course, if Haslam chooses not to make the investment in Year 5, they will receive zero cash flows in Years 6-10. What is the expected NPV of the Yurt project now, considering this additional source of cash flows? Assume all cash flows are discounted at the 10% WACC.

The answer to the first question above is given. How is the second question calculated?

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1000000 70% 30% 10% 100000 500000 5 379078.677 5 1895393.38 -166026.91 B D E 1000000 0.7 100000 500000 5 5 =1-B2 0.1 =C2*(1-(1+B4)^-D2)/B4 =C3*(1-(1+B4)^-D3)/B4 =B2*E2+B3*E3-B1 11. Haslam Homes is considering designing and marketing a concrete, yurt-based pre-fabricated home to compete in the doomsday prepper market. Development will cost $1,000,000 and will take one year. If the yurts are popular (30% probability) the cash flows will be $500,000 per year for 5 years starting in Year 1. If the yurts are not a hit (70% probability) the cash flows will be $100,000 per year for 5 years. Calculate the ENPV of the project. Haslam's cost of capital is 10%. .a. $137,212 .b. -$150,934 c. -$166,027 correct answer .d. -$182,630 -$200,893 e. 12. Haslam realzes that if the yurts are popular, they can expand their markets into Eastern Europe by making an investment of $1 million in bribes and licenses in Year 5 after the yurt's success has been established. If Haslam makes this investment, they can expect 5 years of the same cash flows they received in Years 1-5 in the U.S. market arriving in Years 6-10. Of course, if Haslam chooses not to make the investment in Year 5, they will receive zero cash flows in Years 6-10. What is the expected NPV of the Yurt project now, considering this additional source of cash flows? Assume all cash flows are discounted at the 10% WACC. a. b. $522 $574 $631 $694 $764 C. d. e. correct