r company is considering a project with the following after-tax cash flows (in $millions) Outcome Probability (%) t = 0 t = 1 t = 2 t = 3 Good 50 -14 9 7 9 So-so 50 -14 4 3 4 If the outcome is good, the project would open the door to another investment project which would required an outlay of $9 million at the end of Year 2. The new project would then be sold to another company netting $15 million after-tax at the end of Year 3. All cash flows are to be discounted at 8%. The project's expected NPV without the real option = $ xxxxxxxxxxxxx million. The project’s expected NPV with the growth option = $ xxxxxxxxxxxxxx million. The value of the growth option = $ xxxxxxxxxx million. Round your final answers to 2-decemial places.
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Your company is considering a project with the following after-tax cash flows (in $millions)
|
Outcome |
Probability (%) |
t = 0 |
t = 1 |
t = 2 |
t = 3 |
|
Good |
50 |
-14 |
9 |
7 |
9 |
|
So-so |
50 |
-14 |
4 |
3 |
4 |
If the outcome is good, the project would open the door to another investment project which would required an outlay of $9 million at the end of Year 2. The new project would then be sold to another company netting $15 million after-tax at the end of Year 3. All cash flows are to be discounted at 8%. The project's expected
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