How is the project’s NPV affected?

e. What is the break-even salvage value of this project if Wolverine uses the original financing proposal and funds are not blocked?

f. Assume that Wolverine decides to implement the project, using the original financing proposal. Also assume that after 1 year, a New Zealand firm offers Wolverine a price of $27 million after taxes for the subsidiary and that Wolverine’s original forecasts for Years 2 and 3 have not changed. Compare the present value of the expected cash flows if Wolverine keeps the subsidiary to the selling price. Should Wolverine divest the subsidiary? Explain.