Problem 2. Project Alpha has two phases. You may invest in the first, in both, or in neither. The first phase requires an investment of $100 today. One year later, Alpha will deliver either $120 or $80, with equal probability. At that time, (after the phase 1 payout has been received) you can invest an additional $100 for phase 2. One year later phase 2 pays out either 20% more cash than phase 1 actually delivered, or (equally likely) 20% less. For investments in this business, your company normally applies a 10% hurdle rate. a. How much would Project Alpha be worth if it offered only the phase 1 cash flows, without the phase 2 opportunity? b. How much would the phase 2 opportunity be worth if you had to choose today, once and for all, whether or not to invest in it? c. Assuming you can wait to decide about phase 2, what is the total value of Project Alpha? Should you invest the first $100 ? d. Project Omega has exactly the same structure as Project Alpha, and the same systematic risk, but somewhat different cash flows. For $100 invested today, Omega delivers in phase 1 either $140 or $60, with equal probability. Phase 2 requires an additional $100 investment and delivers either 40% more or 40% less than phase 1 did. What is the total value of Project Omega? Should you invest the first $100 ? e. Compare these two projects. Which is riskier? Which is more valuable? Which has a higher fraction of its value accounted for by "growth options," i.e., the phase 2 opportunity? Assuming both were undertaken, would you finance Alpha and Omega differently? How and why