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Problem 1003 (nvestment Timing Option: Decision Tree Analysis) & Question of Check My Works remaining) 6 eBook Problem Walkthrough Investment Timing Option: Decision-Tree Analysis The Karns of Company is deciding whether to drill for oil on a tract of land that the company owns. The company estimates the project would cost $5 million today. Karns estimates that once drilled, the all will generate positive net cash flows of $2.5 million a year at the end of each of the next 4 years. Although the company is fairly confident about its cash flow forecast, in 2 years it will have more information about the local geology and about the price of oil. Karns estimates that if it waits 2 years then the project would cost $6.5 million. Moreover, if it waits 2 years then there is a 90% chance that the net cash flows would be $2.65 million a year for 4 years and a 10% chance that they would be $1.25 million a year for 4 years. Assume all cash flows are discounted at 11% a. If the company chooses to drill today, what is the project's not present value? Negative value, if any, should be indicated by a minus sign Enter your answers in milions. For example, an answer of $10.550,000 should be entered as 10.55. Do not round intermediate calculations Round your answer to two decimal places million b. Usino dedision-tree analysis does it make sense to wait 2 years before deciding whether to drill? Select- Check My Works remaining) DA +36 PM BI/2021