I understand how to get the answer to question 1, but I'm not sure how he got the answer to question 2 if you could please show your work. Thank you!!

1. A company is considering whether to go ahead with a small-scale trial project that requires an initial outlay of $2 million and, if successful produce cash inflows of $760,000 in perpetuity starting at the end of year one. If not successful, the project will produce no cash flows. The probability of success is 65%. Given the high level of risk associated with project, the company decides to use 25% instead of its normal RRR (WACC) of 12% as a risk-adjusted discount rate for this project.

Given the above information, calculate the NPV of the investment.

Answer: $24,000.00

2. Upon further study the company realizes that, if the project was successful, it creates an opportunity to expand production by investing an additional $12 million at the end of year one. The new investment would increase the project cash flows from $760,000 to $1,820,000 per year as of end of year two in perpetuity. Also, at that point the company feels that a major part of the risk associated with the project would have been resolved and that from year one on it can use its WACC.

Given this new information, calculate the NPV of the investment.

Answer: $41,866.67