MC Corp. is considering launching a new product but there is some uncertainty about how the roduct will be received by consumers. Your junior analyst has provided yout with three scenarios f possible market conditions and estimated the probability of each scenario. Starting the project oday would incur costs of $12,000,000, the cost of capital is 11% and the firm's tax rate is 25%. The three scenarios are as follows: - "Good": The product is very popular and operating profits are estimated to start at $1,100,000 in year 1 with a 40% annual growth for the following 2 years. Afterwards, growth slows down to 4% forever. The probability of this scenario is 30%. "Average": Year 1 operating profits are $1,100,000 and grow at 5% in perpetuity. The probability of this scenario is 55% - "Poor": Year 1 operating profits are $800,000 but decline by 10% each year. The probability of this scenario is 15%. a) What is the NPV of this project? Hint: - First, calculate the NPV of the project for each scemario individually (i.e. good aterage, poor). - Then, calculate a weighted aterage of the three scenarios. b) Suppose AMC can hure consultants to do additional market research to deternine hown consumers will receive the product. The research will take one year (i.e. the project cash flows would start one year later). With this research, AMC will know exactly which of the three scenarios is accurate and there would be no uncertainty about the project's solftcome before investing at the end of the first year. What is the project's NPV today in this case? (Hint: Think about in which scenarios AMC twonld decide to go fortuard twith theproject) c) What is the maximum AMC Corp. wordd be willing to pay for conducting this additional market research? d) (Hint: find the ralue of the "option to twit" for one yeur) e) Without doing any calculations, if the probabilities of the "good", "average", and "poor" scenario were 40%,35%, and 25% instead, respectively, would you expect the value of the option to conduct additional research to be higher, lower, or unchanged? Explain