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Fethe's Funny Hats is considering selling trademarked, orange-haired curly wigs for University of Tennessee football games. The purchase cost for a 2-year franchise to sell the wigs is $20,000. If demand is good ( 40% probabillity), then the net cash flows will be $28,000 per year for 2 vears. If demand is bad ( 60% probability), then the net cash flows will be 56,000 per year for 2 years. Fethe's cost of capital is 14%. Do not round intermediate calculations. a. What is the expected NPV of the project? Negative volue, if any, should be indicated by a minus sign. Round your answer to the nearest dollat s b. If Fethe makes the investment today, then it will have the option to renew the franchise fee for 2 more years at the end of Year 2 for an additional payment of $20,000, In this case, the cash flows that occurred in Years 1 and 2 will be repeated (so if demand was good in Years 1 and 2 , it will continue to be good in Years 3 and 4 ). Write out the decision tree. Note: The franchlse fee poyment ot the end of Year 2 is known, so it should be discounted at the risk-free rote, which is 5%. Select the correct decision tree. The correct graph is Use decision-tree analysis to calculate the expected NPV of this project, including the option to continue for an additional 2 years. Negative values, if any, should be indicated by a minus sign. Round your answer to the nearest dollar: $ Check My Work ( 4 remaining)

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