-EUC PROBLEMS- GRADED Q Search this course ment: Chapter 14-EOC PROBLEMS-GRADED Aapnent Sore 57.14% ns Problem 14-08 Question 5of S Check My Work (3 remaining) O 14-2: The Investment Timing Option: An Illustration Problem 14-8 Growth Option: Option Analysis Fethe's Funny Hats is considering selling trademarked curly orange-haired sell the wigs is $20,000. If demand is good (40% probability), then the net cash flows will be $5,000 per year for 2 years. Fethe's cost of capital is 10%. curly wigs for University of Tennessee football games. The purchase cost for a 2-year franchise to for 2 years. If demand is bad (60% probablity, then the net t 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 wll be repeated (so if demand was good in Years 1 and 2, it will continue to be good in Years 3 and 4). Use the Black-Scholes model to estimate the value of the option. Assume the variance of the projects rate of return is 20.25% and that the risk-free rate s g%. Do not round intermediate calculations. Round your answer to the nearest dollar. Use computer software packages, such as Minitab or Excel, to solve this problem Check My Work (3 remaining) -EUC PROBLEMS- GRADED Q Search this course ment: Chapter 14-EOC PROBLEMS-GRADED Aapnent Sore 57.14% ns Problem 14-08 Question 5of S Check My Work (3 remaining) O 14-2: The Investment Timing Option: An Illustration Problem 14-8 Growth Option: Option Analysis Fethe's Funny Hats is considering selling trademarked curly orange-haired sell the wigs is $20,000. If demand is good (40% probability), then the net cash flows will be $5,000 per year for 2 years. Fethe's cost of capital is 10%. curly wigs for University of Tennessee football games. The purchase cost for a 2-year franchise to for 2 years. If demand is bad (60% probablity, then the net t 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 wll be repeated (so if demand was good in Years 1 and 2, it will continue to be good in Years 3 and 4). Use the Black-Scholes model to estimate the value of the option. Assume the variance of the projects rate of return is 20.25% and that the risk-free rate s g%. Do not round intermediate calculations. Round your answer to the nearest dollar. Use computer software packages, such as Minitab or Excel, to solve this problem Check My Work (3 remaining)