You are an analyst working for Goldman Sachs, and you are trying to value the growth potential of a large, established company, Big Industries. Big Industries has a thriving R&D division that has consistently turned out successful products. You estimate that, on average, the division launches two projects every three years, so you estimate that there is a

60%

chance that a project will be produced every year. Typically, the investment opportunities the R&D division produces require an initial investment of

$10.4

million and yield profits of

$1.04

million per year that grow at one of three possible growth rates in perpetuity:

2.7%,

0.0%,

and

2.7%.

All three growth rates are equally likely for any given project. These opportunities are always "take it or leave it" opportunities: If they are not undertaken immediately, they disappear forever. Assume that the cost of capital will always remain at

11.7%

per year. What is the present value of all future growth opportunities Big Industries will produce?

(Hint:

Make sure to round all intermediate calculations to at least four decimal

places.)

What is the present value of all future growth opportunities?

The present value is

$nothing

million.(Round to three decimal places.)