Your firm is comparing two mutually exclusive investment opportunities, one

lasting $3$ years and the other lasting $6$ years. At a $10\%$ cost of capital, the NPV of

the $6-$year investment is $$75M.$

If the firm undertakes the $3-$year project today, they have the option to repeat

the project or revert to the original technology and not repeat the project.

Today's capex for the three$-$year investment is $$1,200M,$ which will be

depreciated straight line to zero, with no expected salvage value. This investment

is expected to save the company $$525M$ per year in pre$-$tax operating costs.

There is a $50\%$ chance that the capex to repeat the project will increase over the

next $3$ years and the resulting NPV will be $-$$$28M,$ but there is also a $50\%$ chance

the capex to repeat the project will decrease to $$1,095M.$ if the project is

repeated in future, the $$525M$ per year in pre$-$tax operating cost savings is

expected to continue. The tax rate is $21\%.$ Under these assumptions, which

project should the firm undertake $-$ the $3-$year project or the $6-$year project?