Project "X" - Not clear it can be a commercial success. Two phases: Phase 1 (Pilot production and test marketing) - Takes 2 years, costs USD 11,000,000 at time=0. Phase 2 (Implementation) - Do this only if Phase 1 indicates success. Build a $10 million plant at time=2. The expansion will generate after-tax cash flows of $3M per year forever starting at time=3. If the project is not successful the salvage value will be zero. Risk: Only a 60% percent chance that Phase 1 will be successful. Compute the NPV of the project if the cost of capital is 12%. (hint: construct a decision tree)