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We are examining a new project. We expect to sell 5,700 units per year at...

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We are examining a new project. We expect to sell 5,700 units per year at $71 net cash flow aplece for the next 10 years. In other words, the annual operating cash flow is projected to be $71 x 5,700 = $404,700. The relevant discount rate is 15 percent, and the Initial Investment required is $1,680,000. After the first year, the project can be dismantled and sold for $1,500,000. Suppose you think it is likely that expected sales will be revised upward to 8,700 units of the first year is a success and revised downward to 4,300 units If the first year is not a success. a. If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering. (Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of the option to abandon? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. NPV b. Option value

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