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Johnson fert and Dog supllies is considering a new project for mobile pet grooming and...

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Finance

  1. Johnson fert and Dog supllies is considering a new project for mobile pet grooming and garden supply sales. The project requires a $10 million expenditure in year 0. The expected cash flows from the project maybe $20 with a probability of 40% or $5 million with a probability of 60%. Thomas' WACC=16% and this project is of similar risk to the rest of Johnsons' business projects. Find the NPV of the project.
  2. If Johnson enters into the project above, it can sell the product in one year for $6 million. Find the NPV of the project with the abandonment option.

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