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Singh Development Co . is deciding whether to proceed with Project x . The after - tax cost would be $ 1 0 million in

Singh Development Co. is deciding whether to proceed with Project x. The after-tax cost would be $10 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
after-tax cash flows of only $1 million per year for the 3 years. If Project x is hugely successful, it would open the door to another investment, Project Y, which would require an
after-tax outlay of $9 million at the end of Year 2. Project Y would then be sold to another company netting $18 million after taxes at the end of Year 3. Singh's WACC is 12%.
a. If the company does not consider real options, what is Project X's expected NPV? Enter your answers in millions. For example, an answer of $10,550,000 should be entered
as 10.55. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to three decimal places.
$
million
b. What is X's expected NPV with the growth option? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value, if
any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to three decimal places.
$
million
c. What is the value of the growth option? Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value, if any, should
be indicated by a minus sign. Do not round intermediate calculations. Round your answer to three decimal places.
$
million
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