4. Lee Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $40 million. Lee expects the hotel will produce positive cash flows of $5 million a year at the end of each of the next 20 years. The project's cost of capital is 10%. (19) a. What is the above projects net present value? nevy C19-400,000, (5,000,000}, {23) 2.57 million b. Lee expects the cash flows to be $5 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Lee will know whether the tax will be imposed. There is a 40% chance that the tax will be imposed, in which case the yearly cash flows will be only $3 million. At the same time, there is a 60% chance that the tax will not be imposed, in which case the yearly cash flows will be $9 million. Lee is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Lee waits a year, the initial investment will increase from $40 million to $43 million, but there will still be 20 years of new cash flows generated just pushed back one year). Assume that all cash flows are discounted at 10%. Use decision-tree analysis to determine whether Lee should proceed with the project today or wait a year before deciding. Make sure to provide all calculations AND to explain WHY Lee should proceed today/wait. c. What is the value of Lee Hotels' real option of being able to wait one year on the decision to proceed