You are looking at the production schedule for a machine. This machine will last 6 more years. When the machine was purchased, your firm expected FCFs of $5 million for each year of production. You believe there is a chance, thatt starting 3 years from now, production levels could be increased. There is a 28% chance that you'll want production to increase to generate $10 million of FCFs in years 3-6. There is a 31% chance that you'll want production to increase to generate $6 million of FCFs in years 3-6. The remaining probability is that you'll want no change to production, leaving FCFs at $5 million in years 3-6. For all scenarios, FCFs in years 1-2 will remain at $5 million per year.

You can purchase a component to attach to your machine that will, if desired, allow it to increase production as predicted above. Without the component , the machine can only produce FCFs at $5 million per year (with no possibility of increasing production). The discount rate is 10%. How much will you be willing to pay today for this component>