You are given the following information on the best guess of related outcomes for a project. The initial cash outlay of a 2-year pilot study of the product is $10M. Following the 2-year pilot study, the company will spend an additional S70M to put the production facility in place at t=2. If the study is successful, which is expected to have a probability of 0.65, the cash flows are estimated at $30M for the first year. If the study fails, the cash flows are estimated at $17M for the first year. Subsequently, the yearly cash flows are expected to grow at an annual real growth rate of 3% on top of inflation during the 4-year production period. The applicable nominal discount rate and inflation rate are, respectively, 14% and 2%, over the life of the entire project. NOTE: You are required to show your calculations in nominal term!!! (a) Compute the NPV of this project (at t=0) assuming that the project will be implemented regardless of the outcome of the pilot study. Now, you are given the option to upgrade by building a better production facility at t=2 for $105M if the pilot study fails, but you will stay with the original facility if the study is successful. The upgraded facility is expected to generate $30M cash flows in the first year, which grow at an annual real growth rate of 3% on top of inflation in subsequent years during the 4-year production period. Compute (1) the NPV of this project that is embedded with the real option, and (11) the value of the real option to upgrade. (b) You are given the following information on the best guess of related outcomes for a project. The initial cash outlay of a 2-year pilot study of the product is $10M. Following the 2-year pilot study, the company will spend an additional S70M to put the production facility in place at t=2. If the study is successful, which is expected to have a probability of 0.65, the cash flows are estimated at $30M for the first year. If the study fails, the cash flows are estimated at $17M for the first year. Subsequently, the yearly cash flows are expected to grow at an annual real growth rate of 3% on top of inflation during the 4-year production period. The applicable nominal discount rate and inflation rate are, respectively, 14% and 2%, over the life of the entire project. NOTE: You are required to show your calculations in nominal term!!! (a) Compute the NPV of this project (at t=0) assuming that the project will be implemented regardless of the outcome of the pilot study. Now, you are given the option to upgrade by building a better production facility at t=2 for $105M if the pilot study fails, but you will stay with the original facility if the study is successful. The upgraded facility is expected to generate $30M cash flows in the first year, which grow at an annual real growth rate of 3% on top of inflation in subsequent years during the 4-year production period. Compute (1) the NPV of this project that is embedded with the real option, and (11) the value of the real option to upgrade. (b)