Einstein Machine Intelligence (EMI), Inc. is considering a Scientific & Urban Studies Intelligent Educator (SUSIE) project whose primary objective is construction of an educational tutoring package called Behavioral enrichment And Intelligence System (BRAINS) for elementary schools. Concurrent with the development and release of BRAINS, licensing of the underlying technology to other firms is expected to generate additional cash flow. The total series of after-tax expected, end-of-year (EOY) cash flows expressed in millions beginning now at Time Zero and ending with terminal value at EOY 6 are as follows: (numbers within parentheses such as $(###) indicate a negative cash flow).

SUSIE CF: Time Zero: $(100); EOY 1: $(8); EOY 2: $12; EOY 3: $(367); EOY 4: $42; EOY 5: $54; EOY 6: $572

Unfortunately SUSIE has a negative NPV using traditional DCF at EMI Inc. WACC discount factor of 12%.

However, a graduate recognized that using the Luehrman technique, SUSIE could be broken into two phases: (1) an R&D Licensing phase and (2) an optional marketing of BRAINS phase. During assessment of the cash flows, he/she realized volatility in the cash flows of σ = 40% with EOY cash flows being:

R&D Licensing: Time Zero: $(100); EOY 1: $(8); EOY 2: $12; EOY 3: $15; EOY 4: $12; EOY 5: $11; EOY 6: $165

BRAINS option: Time Zero: $(0); EOY 1: $(0); EOY 2: $(0); EOY 3: $(382); EOY 4: $30; EOY 5: $43; EOY 6: $407

What is the eNPV of SUSIE considering the NPV of R&D Licensing plus the Black Scholes Call option value of BRAINS? Consider EOY 3 investment of BRAINS as the Exercise Price and the corresponding risk free time value of money as 5.5%.