QUESTION THREE- The DulcePericulum Company (DP Co) has obtained a two-year option to develop a gold mine. The price of gold currently is 40,000 per kilo. DP Co estimates that the gold price is equally likely to increase by 30% or decrease by 10% each year for the foreseeable future. The table below gives further details about the gold mine. The first number is the total amount of gold in the mine, the second number is the total costs of developing the mine, and the third number is the present value of all future gold extraction costs. Expected gold quantity to be sold The present value of the investment costs The present value of all future extraction costs Current gold price 1,400 kg 50m 10m 1 1 L 40,000 per kg The risk-free rate is 3%, and the average return on the market index is 7%. The corporate and investor tax rates are zero. a. Explain what we mean by risk-neutral probabilities. + (5 marks) b. Based on the information above, what is the implied beta of gold? (10 marks) c. What is the current net present value of investing in the gold mine?- (15 marks d. What is the value of the two-year option to develop the mine? (20 marks)