An entrepreneur recently learned about a new hotel business that requires an initial investment of $12M and annual cash flow of $2M in perpetuity. The appropriate discount rate is 20%. But there is some uncertainty concerning annual cash flows. His cash flow estimate of $2M per year actually reflects his belief that: there is a 50% probability of good state - annual cash flows will be $3M and a 50% probability of bad state - annual cash flows will be $1M. The entrepreneur would like to expand the hotel business in the good state. He believes that there are 10 locations in the country that can support this hotel. He will not expand the business in the bad state. Now, what is the NPV of the project? What is the value of the option to expand