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  3. your firm is considering a project with the follow

Your firm is considering a project with the following cash flows ...

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Finance

Your firm is considering a project with the following cash flows

Cash outflow 1 2 3
Best case 25% 25000 18000 18000 18000
Base case 50% 25000 12000 12000 12000
Worst case 25% 25000 -8000 -8000 -8000

You learned that the firm can abandon the project if it if it does so after one year of operations in which case it can sell the asset and receive $15,000 in cash at the end of year 2. assume that all cash flows are after tax amount the WACC is 12%

what is the projects NPV without the abandonment option?

What is the expected NPV with the abandonment option?

what is the value of the abandonment option?

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