11-5: Your company is considering a project to expand operations, but the evaluation of traditional NPV shows a negative amount of $2,500. Closer examination shows that there is a 35% chance of additional gain from project abandonment at the end of 3 years, adding to the NPV in the amount of $3,000. Also, there is a 45% chance that projected stimulus from the project would increase the NPV by $4,000.

(A) Calculate the strategic net present value (NPV) from the additional information.

(B) What is your recommendation to the management team?