Your company, which of course produces state-of-the-art widgets, is considering expanding into Asia. The expansion will cost $3,100,000. Because of the risk you are discounting the expected future cash flows using a 15% discount rate. In addition, you expect the following:

There are three possible outcomes and free cash flows (FCF) per year, for 10 years, as given in the table below.

Outcome	FCF (000s)	Probability
Good	1,200	0.15
Most Likely	600	0.70
Bad	100	0.15

At the end of year 2, if the outcome is good, you will be able to further expand by investing another $3,000,000. Such investment will generate another 1,200 in cash flows for years 3 through 10. If the outcome is bad, then at the end of year 4 the project can be abandoned and liquidated for $1,000,000, net of any tax effects.

What is the NPV of the project without the options?

What is the NPV of the project with the options?

What is the value of the options?