NPV with decision tree The Alset car company,a prominent car manufacturer in France, may design a new electric based on the "Back to the Future" movies. First, Alset would have to invest $10,000 in t = 0 for the design and testing of the new car.Alset's managers believe there is a 70% probability that the phase will be successful and the project will continue.If Stage 1 is not successful, the project will be abandoned at zero salvage value. The next stage, if undertaken, would consist of making the mock-ups and prototypes of three cars.This would cost $750,000 at t = 1. If the cars test well, Alset would go into production.If they do not, the mockups and prototypes could be sold for $500,000 in t =2. The managers estimate the probability is 80% that the cars will pass testing, and that Stage 3 will be undertaken. Stage 3 consists of converting an unused production line to produce the new design.This would cost $2M at t = 2.If the economy is strong at this point, the net value of sales would be $5.0M; if the economy is weak, the net value would be $1.8M. Both net values occur at t = 3, and each state of the economy has a probability of 0.5. Alset's corporate cost of capital is 14%. Construct a decision tree and determine the project's expect NPV. x"!E|d>/]1N)!V)!