[step:Prove $\hat{\Delta}(\{q_0\}, w) = \hat{\delta}(q_0, w)$ by induction on $|w|$]
[claim:For every $X \in \mathcal{P}(Q)$ and every $w \in \Sigma^\star$, $\hat{\Delta}(X, w) = \hat{\delta}(X, w)$]
We induct on $|w|$.
*Base case*, $w = \varepsilon$. By definition, $\hat{\Delta}(X, \varepsilon) = X = \hat{\delta}(X, \varepsilon)$.
*Inductive step.* Fix $n \geq 0$ and suppose the identity holds for every word of length $n$. Let $w \in \Sigma^\star$ have length $n + 1$, and write $w = ua$ with $|u| = n$, $a \in \Sigma$. By the recursive definition of $\hat{\Delta}$,
\begin{align*}
\hat{\Delta}(X, ua) &= \Delta(\hat{\Delta}(X, u), a) = \bigcup_{q \in \hat{\Delta}(X, u)} \delta(q, a),
\end{align*}
using the definition $\Delta(Y, a) = \bigcup_{q \in Y} \delta(q, a)$ in the second equality. By the inductive hypothesis applied to $u$ (of length $n$), $\hat{\Delta}(X, u) = \hat{\delta}(X, u)$. Substituting,
\begin{align*}
\hat{\Delta}(X, ua) &= \bigcup_{q \in \hat{\delta}(X, u)} \delta(q, a) = \hat{\delta}(X, ua),
\end{align*}
using the recursive definition of the extended nondeterministic transition function $\hat{\delta}(X, ua) = \bigcup_{q \in \hat{\delta}(X, u)} \delta(q, a)$ in the last equality. This closes the induction.
[/claim]
[proof]
See the inductive argument stated in the claim.
[/proof]
Specialising to $X = \{q_0\}$, for every $w \in \Sigma^\star$,
\begin{align*}
\hat{\Delta}(\{q_0\}, w) &= \hat{\delta}(\{q_0\}, w) = \hat{\delta}(q_0, w).
\end{align*}
The second equality is notation: $\hat{\delta}(q_0, w)$ denotes $\hat{\delta}(\{q_0\}, w)$, the set of $N$-states reachable from $q_0$ by reading $w$.
[/step]