You and your brothers have just had a great idea for a new product, and you would like to try to bring it to life, You would need to immediately spend $16.000, Your pro-forma calculations show that an estimated $2,000 would be coming in each year in after-tax profits for the next 12 years. You believe 8% is appropriate to use for the discount rate. Unfortunately, according to these numbers the NPV of this pilot project is negative (which can be verified). Fortunately, though you and your brothers completely disagree on how much profit may be coming in each year. The yolatility of these annual prafits is 34 . What this means is that if for this pilot project the profits turn out much higher, then you all agree that expanding this business might make a lot of sense, The expansion would involve adding 18 more of such products to your production line and this would take place when the first 12 -year pilot product project is over. - In general, a higher volatility (see given) makes it more worth it to do the profect expansion. - In order to calculate the value of the possibility of this expansion one can use the Blackescholes formula. In this formula. the cquivalent of the "current stock price" equals whichis nothing but HINTE You will nu at are given in this