An investment your firm is considering will cost you $5 million today. You expect to receive $7 million one year from now from the sale of the investment. You also expect to receive $500,000 in income from the investment at the end of one year. The expected sales price of $7 million is normally distributed with a standard deviation of $1 million.
If you require a 10 percent rate of return on risk-free projects and a 15 percent rate of return on projects such as this, what contribution will this project make to your firm's value, after considering the riskiness of the projected returns?