Singh Development Co. is deciding whether to proceed with Project X. The cost would be $11 million in Year 0. There is a 50% chance that X would be hugely successful and would generate annual after-tax cash flows of $70 million per year during Year 1,2, 3. However, there's 50% chance that X would be less successful and would generate only $1 million per year forthe 3 years. If project X is hugely successful, it would open the door for another investment, Project Y, which would require an outlay of $8 million at the end of Year 2. Project Y would be then sold to another company at a price of $16 million at the end of Year 3. Singh's WAAC is 9%.

a) If the company does not consider real options, what is Project X's expected NPV?

b) What is X's expected NPV with the growth option?

c) What is the value of the growth option?