3. Feldstein Drug Company is considering a new drug, which would be sold over the counter without a prescription. To develop the drug and to market it on a regional basis will cost $12 million over the next 2 years, $6 million in each year. Expected cash inflows associated with the project for years 3 through 8 are $1 million, $2 million, $4 million, $4 million, $3 million, and $1 million, respectively. If the project is successful, at the end of year 5 the company will have the option to invest an additional $10 million to secure a national market. The probability of success is .60; if not successful, the company will not invest the $10 million and there will be no incremental expected cash flows. If successful, however, cash flows are expected to be $6 million higher in each of the years 6 through 10 than would otherwise be the case with a probability of .50, and $4 million higher with a probability of .50. The company's required rate of return for the project is 14 percent.