You are the CFO of a firm producing chemical products, and you are considering investing in a new project. You expect that this project will generate revenues of $12 million in its first year of operation, and that these revenues will grow at the rate of 5% per year thereafter. The project also entails R&D expenditures of $2 million in the first year of operation and these expenditures are expected to grow at the rate of 8% per year. If the company decides to undertake the project now, it will become operational next year. Your recommendation to the Board of Directors is that the project be undertaken, but that it be pursued only as long as it yields a positive net cash flow. That is, it will be terminated when R&D expenditures are larger than the revenues. The weighted average cost of capital is 7%. The firm must invest $215 million up front and also disburse $50 million for clean-up costs (for environmental protection) during the last year of the project. If undertaken, the project will be pursued for ____________ years and the net present value of the project is ______________.

Select one:

a. 42.8 years ; - $12.435 million

b. 52.6 years ; $2.126 million

c. 64.6 years ; $42.256 million

d. 23.8 years ; - $3.895 million

e. 36.3 years ; $23.578 million