The real options alternative allows for flexibility and the delay of the investment for 1 year. In this case, if we do a pilot project we will be better able to evaluate ERP implementation complexities, achievable supply chain benefits, and the market share our products will achieve. However, the cost of the project will rise to $110 Million ($10 Million this year and $100 Million next year) with the one-year delay and additionally management decides to purchase and implement the financial module in year 1 at a cost of $10 Million (real option).

Please show me how I can do the below 3 items in Excel. I am not getting the same answer when I add them in my calculator: COC = 10%

1. Present value of cash outflows: $-10 mil - $100 mil/(1+COC) * .5 = -$55.45 mil

2. Present value of expected cash inflows: Good result (expected value): {$1 mil/(1+COC) + [($15 mil/COC)/(1+COC)] }* .5 = $68.64 mil

3. Bad Result (expected value): {$.5 mil/(1+COC) + [($.5 mil/ COC)/(1+COC)] }* .5 = $2.50 mil