Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value

of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options.

Consider the case of Markung's Co$.$:

Markung's Co$.$ is considering a three$-$year project that will require an initial investment of $$55,000.$ It has estimated that the annual

cash flows for the project under good conditions will be $$60,000$ and $$7,000$ under bad conditions. The firm believes that there is a $60\%$

chance of good conditions and a $40\%$ chance of bad conditions.

If the firm is using a weighted average cost of capital of $13\%,$ the expected net present value $($NPV$)$ of the project is

your answer to the nearest whole dollar.$)$

Markung's Co$.$ wants to take a potential growth option into account when calculating the project's expected NPV$.$ If conditions are good, the firm will be

able to invest $$4,000$ in year $2$ to generate an additional cash flow of $$14,000$ in year $3.$ If conditions are bad, the firm will not make any further

investments in the project.

Using the information from the preceding problem, the expected NPV of this project$-$when taking the growth option into account$-$is

$($Note: Round your answer to the nearest whole dollar.$)$