1. Valeo Engineering has come up with a new hover board prototype and is ready to go ahead with pilot production and test marketing. The pilot production and test marketing phase will last for one year and cost $520,000. Your management team believes that there is a 50% chance that the test marketing will be successful and that there will be sufficient demand for the new hover board. If the test-marketing phase is successful, then Valeo Engineering will invest $3 million in year one to build a plant that will generate expected annual after-tax cash flows of $400,000 in perpetuity beginning in year two. If the test marketing is not successful, Valeo can still go ahead and build the new plant, but the expected annual after-tax cash flows would be only $200,000 in perpetuity beginning in year two. Assuming that Valeo does not have the ability to sell the prototype in year one for $300,000, what is the NPV of the Valeo Engineering hover board Project?

   		$81,901
   		$70,909
   		-$45,455
   		$55,755
   		-$65,466