Part a is already done, and the answer is $(47,698.05). Please answer part b, c, d, e in details. Thank you!

You are evaluating a new product and you expect: - P=$250/ unit - Variable cost =$50/ unit; - Fixed cost =$300,000/ year; - Product production life =5 years; - Expected Q=6,000 units/year starting in Year 1; - CapEx =$2.5m in period 0 (straight-line depreciation over 5 years); - Cost of Capital =20%, taxes =20% a) What is the base case NPV? Your marketing department tells you that after the first year the product will either be a hit and sales will increase, or the product flop and sales will fall. Assume they forecast the following for Years 2-5: - Q=7,000 units w/ probability =.75 - Q=3,000 units w/ probability =.25 - No taxes are collected/refunded if there is no profit. b) Draw a decision tree of the problem. c) Should you go ahead with the project? The builder of the plant is willing to sell you a put option in period 0 . Exercising the option allows you to sell back the asset to the manufacturer for $1,000,000 any time in the future before your project ends (at the end of period 4). d) Is this option valuable and if so, when will it be exercised? e) What would you be willing to pay for this option