I need help figuring out how my professor got the answers to these questions on my study guide. If you could also draw a decision tree and show your work, I would greatly appreciate it! Thank you, I will give thumbs up!!

The Masterson, Inc. is considering the purchase of a piece of equipment whose upfront cost is $105 million. The company estimates that the result of operating this equipment could go one of two ways: it could be highly successful and produce EBIT of $24 million in year one and that EBIT grows at 3.28% per year for nine more years; or it could be a poor performer and produce only $7 million in EBIT in year one and that will grow by only 2.10% per year over the remaining useful life of ten years. The machine will be depreciated on a straight-line basis over the project life down to a book value of $15 million. The expected salvage value of the machine at the end of year ten is $18 million. The companys marginal tax rate is 30% and its RRR or WACC is 14%. The company assigns a 40% chance to success.

1. Given the above information and based on static analysis, should the company go ahead with its investment?

Answer: Yes, because NPV = $2,396,344.50

2. Upon further study the company realizes that, if the project proved to be underperforming by the end of year one, the company can stop production and sell the machine for a salvage value of $98 million. Given this information, should the company go ahead with the investment?

Answer: Yes, because NPV = $13, 538,504.20

3. What is the present value of the option to abandon?

Answer: $11,142,159.70