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. Valeo has the option to stop the project at any time and sell the prototype hover board to an overseas competitor for $300,000. Valeo's cost of capital is 10%. Assuming that Valeo has the ability to sell the prototype in year one for $300,000, what is the NPV of the Valeo Engineering hover board project?

$61,901

$70,909

$80,109

$49,900

$475,500