Intro Win Big Inc. is considering the development of a new hotel and casino. The initial cost of the project is $86 million, including the land, building and furniture. The company has a weighted average cost of capital of 9%. There is a 40% probability that another casino will be built on a nearby Indian reservation. The expected cash flows for each case are given below. After 6 years, cash flows are expected to increase at a constant rate forever. A 1 WACC 2 3 4 Probability 5 B 0.09 Competition No comp. 0.4 0.6 7 Year 6 Cash flows (SM) Competition No comp. 8 0 -86 -86 9 1 3 6 10 2 4 9 11 3 5 14 12 4 5 17 13 5 5 19 14 6 5 20 15 Growth rate 16 0% 2% after year 6 The company cannot delay the decision: if it wants to build the casino, it needs to build it now, since a new law will make it illegal to build new casinos starting next year. Part 1 Attempt 1/10 for 10 pts. What is the expected NPV of the project (in $ million)? 0+ decima Submit Part 2 Attempt 1/10 for 10 pts. While the company cannot delay the project, it can sell the casino after the first year for $77.4 million. What is the NPV of the project now (in $ million)? 0+ decima Submit Part 3 Attempt 1/10 for 10 pts. What is the value of the option (in $ million)?