1. ABC Inc. is considering investing in a 5 -year project that has a 10% discount rate, requires an initial investment of 800000. Suppose that there is a 30% probability that the yearly cash flows will be 150000 and a 70% probability that they will be 350000. In addition, at the end of the 1st year we will know whether the project is a success (cash flow is 350000 ) or a failure ( 150000 ), and we have the option to abandon the project at the end of the first year and receive the salvage value of f500000. First determine the optimal abandonment strategy. Then calculate the project's NPV and the value of the abandonment option using that strategy. Conclude. 1. ABC Inc. is considering investing in a 5 -year project that has a 10% discount rate, requires an initial investment of 800000. Suppose that there is a 30% probability that the yearly cash flows will be 150000 and a 70% probability that they will be 350000. In addition, at the end of the 1st year we will know whether the project is a success (cash flow is 350000 ) or a failure ( 150000 ), and we have the option to abandon the project at the end of the first year and receive the salvage value of f500000. First determine the optimal abandonment strategy. Then calculate the project's NPV and the value of the abandonment option using that strategy. Conclude