What is the estimated NPV of the proposed investment , without considering the investment delay option?

EXHIBIT 12.7 Decision Trees: Real Options Analysis (Investment-Timing Option) K $50 A B D E F G H 1 1 Panel A: Expected NPV--Invest in Project Today (time 0); amounts in $ millions 2 3 Discount rate (WACC) = 15.00% 4 5 Cash Outflow Market Demand End-of-Period Cash Inflows NPV of Weighted 6 @ time 0 (Scenario) Probability 1 2 3 Scenario NPV 7 High 0.25 $70 $70 $70 $59.826 $14.956 8 $100 Medium 0.50 $50 $50 $14.161 $7.081 9 Low 0.25 $5 $5 $5 ($88.584) ($22.146) 10 1.00 Expected NPV = ($0.109) 11 12 Panel B: Expected NPV--Delay Investment by One Year, Only if NPV is increased; amounts in $ millions 13 14 Discount rate (WACC) = 15.00% 15 Risk-free rate- 5.00% 16 Cash outflow in one year = $100 17 18 Market Demand End-of-Period Cash Inflows PV of Cash PV of Cash Weighted 19 (Scenario) Probability 1 2 3 4 Outflows Inflows NPV @ time of 20 High 0.25 ($100) $70 $70 $70 ($95.238) $138.979 $10.935 21 Medium 0.50 ($100) $50 $50 $50 ($95.238) $99.271 $2.016 22 Low 0.25 $0 $0 $O $0 $0.000 $0.000 $0.000 23 1.00 Expected NPV = $12.951 24 * discounted at risk-free rate of interest 25 + discounted at WACC (weighted average cost of capital); formula for cell 120: =PV(B14,1,(PV(B14,3,E20))) 26 # formula for cell J20: =(120+H20)*C20 27 28