3M is evaluating a new type of adhesive. The initial investment required is $913 million. The company expects to sell 47 million units every year forever, at a net cash flow of $2.83 per unit.

Investments with similar risk deliver a rate of return of 15%.

1.What is the NPV of the project (in $ million)?

2.

In fact, there is a 50% chance that annual sales will hit 70.5 million units and a 50% chance that they will be 23.5 million units. The project assets can be sold for $730 million (after taxes) in year 1. What is the expected NPV of the project if the company can abandon or expand the project after one year (in $ million)?