IBM is considering bidding on a government contract to provide a computer system with artificial intelligence to the IRS in order to catch tax evaders. Developing such a system would cost $29 million. In return, IBM would be given 10% of all taxes collected from tax evaders identified by the new system that were not identified by the existing system, over the course of six years. The company has a weighted average cost of capital of 10%. IBM estimates that there is a 40% probability that the system will succeed and work much better than the existing system, and a 60% probability that it will fail and underperform. Due to machine learning, the system's success rate will improve over time. The expected cash flows for each case are given below. After 6 years, the contract expires and all cash flows will stop. A B C 1 WACC 0.1 2 3 4 Probability 5 Success 0.4 Failure 0.6 6 Cash flows ($M) 7 Year Success Failure 8 0 -29 -29 9 1 15 -6 10 2 20 -4 11 3 24 -2 12 4 27 -1 13 5 29 -1 2 14 6 30 -1 Part 1 What is the expected NPV of the project (in $ million)? 2+ decimals Submit Attempt 1/10 for 10 pts. Part 2 Attempt 1/10 for 10 pts. If the project is successful, IBM will have the option of providing the same service for another 9 years after the first 6 years. No additional investment is required and the cash flow will remain constant at $30 million over 9 years. What is the NPV of the project now (in $ million)? 1+ decimals Submit