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Your company is considering a project with the following after-tax cash flows (in $millions) Outcome Probability (%) t=0 t = 1 t = 2 t=3

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Your company is considering a project with the following after-tax cash flows (in $millions) Outcome Probability (%) t=0 t = 1 t = 2 t=3 t = 4 Good 50 -15 9 8 7 6 So-so 50 -15 5 4. 3 2 If the outcome is good, the project would open the door to another investment project which would required an outlay of $9 million at the end of Year 3. The new project would then be sold to another company netting $15 million after-tax at the end of Year 4. All cash flows are to be discounted at 9%. Estimate the value of the growth option. $1.84 million $2.84 million $2.02 million O $1.27 million O $3.17 million

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