Modenar Covac Limited (MCL) is assessing a project which requires an initial investment of $2.8 million. The project is expected to generate $150,000 and $250,000 at the end of the first year and the second year, respectively. After that, the project is expected to generate an annual cash flow of $380,000 at the end of each year for four years. If MCL launches the project today, it will have an insight into an additional investment opportunity six years from now (at t = 6). Based on the best information available today, there is a 55% probability that the outlook will be favourable, in which case the future investment opportunity will have a net present value of $5.8 million at t = 6. There is a 45% probability that the outlook will be unfavourable, in which case the future investment opportunity will have a net present value of -$3.5 million at t = 6. The project's cost of capital is 10%. a MCL does not have to make a decision now regarding whether the additional opportunity will be taken. Instead, the company can wait until the outlook is known, and decide at t = 6 whether or not it wants to take this additional opportunity. However, it will not be able to take the future investment opportunity unless it makes an initial investment of $2.8 million today (i.e., at t = 0). QUESTIONS a) Estimate the net present value of the project without consideration of the potential future opportunity. [5 marks) b) Estimate the net present value of the project after consideration of the potential future opportunity. [12 marks] c) What is the present value of the additional investment opportunity embedded in this project? [3 marks]