Merck a major U. S. pharmaceutical firm considers an R&D JV with Biocon, a biotech firm in India. Using the following terms of the agreement, estimate the NPV from Merck's perspective.

Payments to Indian firm for development work. Biocon is to receive an upfront payment of INR 90 million. A major milestone is expected in two years with a 50 percent probability of success. In this event, Merck is expected to pay Biocon INR 120 million. The R& D work would then be completed in a year and the product would be launched two years hence (that is, five years from now) after obtaining the necessary regulatory approval. The probability of regulatory approval is 50 percent.

Revenues and expenses. Merck expects revenues (net of direct expenses and selling expenses) of USD 15 million a year for a period of three years (that is, years 6- 8). Indirect expenses are expected to amount to USD 2 million annually. Merck will also pay Biocon royalty of 5 percent of gross revenues.

Other data. Spot USDINR equals 60 and is expected to vary little in the next few years. Merck has a cost of capital of 8 percent and pays no taxes.

Calculate the NPV (in million)