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Your firm is considering an oil drilling project. The project will cost $22 million after-tax...

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Accounting

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Your firm is considering an oil drilling project. The project will cost $22 million after-tax today and is expected to generate after-tax cash flows of $9 million per year at the end of the next 4 years. If the company waits for 2 years, the project will cost $24 million after-tax and there is a 95% chance that the project will generate $11 million per year for four years and a 5% chance that the project will generate $8 million per year for 4 years. Assume all cash flows are discounted at 10%. The project's expected NPV if your firm chooses to drill today = $ = million. The value of this investment timing option = $ million. Round your final answers to 2-decemial places. Should your company wait 2 years before deciding whether to drill - "yes" or "no" Prob (%) t = 0 t = 1 t = 2 t = 3 t = 4 t = 5 t = 6 -22 9 9 9 9 95 -24 11 11 11 11 -24 8 8 8 8 8

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