Save Submit Assignment for Grading Question 2 of 7 estions Problem 14-01 (Investment Timing Option: Decision Tree Analysis) Check My Work (2 remaining) Book Problem Walk-Through Investment Timing Option Decision-Tree Analysis Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $21 million, Kim expects the hotel will produce positive cash flows of $3.36 million a year at the end of each of the next 20 years. The project's cost of capital is 13%. 2. What is the project's net present value? Negative value, if any, should be indicated by a minus sign. Enter your answers in millions. For example, an answer or $10,550,000 should be entered as 10.55. Do not round Intermediate calculations, Round your answer to two decimal places. million bu kim expects the cash flows to be $3.36 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tay. One year from now, Kim wil know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.1 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $4.62 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be Imposed. If Kim waits a year, the initial investment will remain at $21 million. Assume that all cash flows are discounted at 13%. Use decision-tree analysis to determine whether Kim should proceed with the project today or wait a year before deciding. It makes sense to wait a year before deciding. + Check My Work (2 remaining) Oy Problem 14-01 Cinvestment Timing Option: Decision-Tree Analysis) Question 2 of 7 Save Submit Assignment for Grading MacBook Pro