Need the answer inan answer format

NPV with decision tree

The Aslet car company,a prominent car manufacturer in Fremont, may design a new electric based on the "Back to the

Future" movies.

First, Aslet would have to invest $10,000 in t = 0 for the design and testing of the new car. Aslet's managers believe there

is a 70% probability that the phase will be successful and the project will continue. If Stage 1 is not successful, the project will be

abandoned at zero salvage value.

The next stage, if undertaken, would consist of making the mock-ups and prototypes of three cars. This would cost $600,000 at

t = 1. If the cars test wll, Aslet would go into production. If they do not, the mockups and prototypes could be sold for $200,000. The

managers estimate the probability is 80% that the cars will pass testing, and that Stage 3 will be undertaken.

Stage 3 consists of converting an unused production line to produce the new design. This would cost $1.2M at t = 2. If the economy is

strong at this point, the net value of sales would be $3.2M; if the economy is weak, the net value would be $1.6M. Both net values occur at

t = 3, and each state of the economy has a probability of 0.5. Aslet's corporate cost of capital is 14%.

Construct a decision tree and determine the project's expect NPV.

NPV with decision tree The Aslet car company,a prominent car manufacturer in Fremont, may design a new electric based on the "Back to the Future" movies. First, Aslet would have to invest $10,000 in t = 0 for the design and testing of the new car. Aslet's managers believe there is a 70% probability that the phase will be successful and the project will continue. If Stage 1 is not successful, the project will be abandoned at zero salvage value. The next stage, if undertaken, would consist of making the mock-ups and prototypes of three cars. This would cost $600,000 at t = 1. If the cars test wll, Aslet would go into production. If they do not, the mockups and prototypes could be sold for $200,000. The managers estimate the probability is 80% that the cars will pass testing, and that Stage 3 will be undertaken. Stage 3 consists of converting an unused production line to produce the new design. This would cost $1.2M at t = 2. If the economy is strong at this point, the net value of sales would be $3.2M; if the economy is weak, the net value would be $1.6M. Both net values occur at t = 3, and each state of the economy has a probability of 0.5. Aslet's corporate cost of capital is 14%. Construct a decision tree and determine the project's expect NPV