Nishi Trading Ltd is deciding whether to proceed with Project X. The cost would be $9 million in Year 0. There is a 50% chance that X would be hugely successful and would generate annual after-tax cash flows of $6 million per year during Years 1, 2, and 3. However, there is a 50% chance that X would be less successful and would generate only $1 million per year for the 3 years. If Project Xis hugely successful, it would open the door to another investment, Project Y, which would require an outlay of $10 million at the end of Year 2. Project Y would then be sold to another company at a price of $20 million at the end ofYear 3. Nishi Trading Ltd WACC is 11%.

(a). If the company does not consider real options, what is Project X's NPV?

(b ). What is Project X's NPV considering the growth option? (c). How valuable is the growth option?