. A startup requires investing $5 million in a project at time 0 and an additional $1 million at year 3. If the project is successful, it can return $70 million at the end of six years if it succeeds; however, it realizes that the project may fail at any time between now and the end of six years but it will still need to make the two capital investments. The following table has the estimates of the probabilities of failure for the project. A venture capitalist is considering an equity investment in the project, and its cost of equity for a project with this level of risk is 14%. Compute the expected net present value of the venture capital project.

Year

1

2

3

4

5

6

Failure probability

0.18

0.26

0.27

0.11

0.13

0.10