Your company is thinking about taking on an investment project that will require an

initial outlay of $$10,000,000$ at time period zero. You believe that this project will

produce expected after$-$tax cash flows of $$2,500,000$ each year for $8$ years $($Years $1-$

$.$ Given a cost of capital for this project of $10$ percent, you can calculate that the

expected NPV for this project is $$3,337,315\mathrm{.}49$ and its IRR is $18\mathrm{.}62$ percent.

Assume now that the firm has the option of delaying the start of this project for $2$ years.

If they delay the project its cost at Year $2$ will increase to $$12,500,000.$ The firm will

also have better information about what the cash flows will actually be in Years $3-10$

$($still an $8-$year project$).$ Specifically, there is a $40$ percent probability that the cash flow

will be $$250,000,$ and a $60$ percent chance that the cash flow would be $$4,000,000.$

Ignoring option pricing, determine the incremental NPV that will arise, as of time period

zero, if the firm delays implementation of this project for $2$ year.

A$.$ $$1,099,358\mathrm{.}68$

B$.$ $$1,059,346\mathrm{.}57$

C$.$ $$1,086,021\mathrm{.}31$

D$.$ $$1,046,009\mathrm{.}20$

E$.$ $$1,072,683\mathrm{.}94$