May you kindly please solve Question (ii) for me and show me the workings. Project Cost of: $10million

NB: THE PROJECT COST IS $10 MILLION

Question 3 (35 Marks) - See worksheets 'Question 3 - Oil data' You are in the process of conducting a valuation of a long-term capital project on behalf of Sasol where they intend on investing in a new oil refinery. Based on the data provided and a project cost of i. Calculate the NPV of the project. If oil prices increase for two consecutive years (year 1 and year 2), Sasol has the option to increase their year three capacity (barrel production) by 50%. The cost of expansion would take place in year two and be equivalent to 35% of the initial project cost. Calculate the value of the option to increase capacity. Question 3 (35 Marks) - See worksheets 'Question 3 - Oil data' You are in the process of conducting a valuation of a long-term capital project on behalf of Sasol where they intend on investing in a new oil refinery. Based on the data provided and a project cost of i. Calculate the NPV of the project. If oil prices increase for two consecutive years (year 1 and year 2), Sasol has the option to increase their year three capacity (barrel production) by 50%. The cost of expansion would take place in year two and be equivalent to 35% of the initial project cost. Calculate the value of the option to increase capacity