7) Cost of innovation with delay and risk. After some additional analysis, you realize that the $200,000 option is not guaranteed to work. You feel there is a 95% probability it will work in which case the firm's cash flows will rise as described in the previous question. If the innovation fails, then cash flows will not change (i.e. the increase is zero). The success of the innovation is a function solely of whether the new production process works. The $200,000 will be spent today before you know whether the new innovation works. What is the NPV of the project with the lower cost of innovation ($200,000), delay, and risk? Assume that the correct discount rate is 10%. Hint: We will see in Module 6 that in this case the risk only affects the expected cash flows, but not the interest rate with which we discount those expected cash flows. While probably counterintuitive at this point, we will see that this is because the outcome of the project does not depend on how other assets (stocks, bonds, etc.) perform, in particular it does not depend on how the economy performs.