Tropical Sweets is considering a project that will cost $80 million and the cost of capital for this type of project is 10 percent and the risk-free rate is 6 percent. After discussions with the marketing department, you learn that there is a 30 percent chance of high demand, with future after-tax cash flows of $50 million per year for three years. There is a 40 percent chance of average demand, with after-tax cash flows of $40 million per year for three years. If demand is low (a 30 percent chance), after-tax cash flows will be only $10 per year for three years. The project cannot be delayed. But if Tropical Sweets implements the project, then Tropical Sweets will have a growth option. It will have the opportunity to replicate the original project at the end of its life and Tropical knows the cost will be the same $80 million (100% sure).

1) What is the expected NPV without growth option?

2) What is the expected NPV with growth option?