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Investment Timing Option: Decision$-$Tree Analysis

The Karns Oil Company is deciding whether to drill for oll on a tract of land that the company owns. The company estimates the project would cost $$16$ million today, Karns estimates that, once drilled, the oil will generate positive net cash flows of $$8$ million a year at the end of each of the next $4$ years. Although the company is fairly confident about its cash flow forecast, in $2$ years it will have more information about the local geology and about the price of oil. Karns estimates that if it waits $2$ years then the project would cost $$17$ million. Moreover, if it waits $2$ years, then there is a $90\%$ chance that the net cash flows would be $$8\mathrm{.}4$ million a year for $4$ years and a $10\%$ chance that they would be $$4\mathrm{.}4$ million a year for $4$ years. Assume all cash flows are discounted at $12\%.$

a$.$ If the company chooses to drill today, what is the project's net present value? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $$1\mathrm{.}23$ million should be entered as $1\mathrm{.}23,$ not $1,230,000.$ Round your answer to two decimal places. $ $$ million

b$....$m$.$ daricinn$-$tree analvsis, does it make sense to wait $2$ years before deciding whether to drill?