Fox Searchlight Pictures recently purchased a script for a new movie about a poker player. It will cost $40 million to produce the movie (which is xed regardless of when it is produced]. Following the production of the movie today, the cash ow to be generated 'om the movie in year 1 will be $40 million with 2.5% chance or $10 million with ?5% chance. From year 2, the movie will generate $5 million, which will decline by 5% per year forever. Given the growing popularity of the poker game= the producer believes that it may be better to delay the decision of movie production for a year. In year 1, the uncertainty about the rst cash ow to be generated 'om the movie one year after production ($4!) million or $10 million) will be resolved. The remaining cash ows will be the same as above (that is, the second cash ow will be $5 million, which will decline by 5% per year forever). The rm requires at least 15% on the project. Do not consider any other factors. (a) 1ll'i'hat is the NPV of the project if the rm needs to decide today whether to invest in the project? (b) 'What is the embedded real option in this project? Can the real option be regarded as a call option or a put option? Identify the underlying asset and the exercise price of the option. (c) Is the project worthwhile if considering the real option? (d) Should the rm need to produce the movie now or wait a year