Question: What is the answer for this question ? The Circle developed an innovative technology to profile their users such that ads could be better fitted

What is the answer for this question ?

The Circle developed an innovative technology to profile their users such that ads could be better fitted to each one. The implementation of this technology costs 70 million. This amount will remain constant in the years to come. If implemented, sales will increase by 10.5 million per year, in perpetuity. The respective costs will increase by 6.6 million per year, also in perpetuity. Assume that the cost of capital and the risk-free rate are both 4% per year. However, this innovative technology incorporates some degree of risk. Actually, in one year, sales will be either 15 million or 8 million with equal probability. Calculate the expected NPV (in millions) of the project if it is postponed by one year. (Ignore taxes)

a) 27.50

b) 50.48

c) 67.31

d) 39.81

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