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2. M.C.P Games, Inc., has hired you to perform a feasibility study of a new video game that requires a $7,000,000 initial investment in equipment.
2. M.C.P Games, Inc., has hired you to perform a feasibility study of a new video game that requires a $7,000,000 initial investment in equipment. M.V.P. expects a total annual operating cash flow of $1.3 million for the next 10 years. The relevant discount rate is 10%. Cash flows occur at the end of the year. Assume the corporate tax rate is 0\%. b. After one year, the estimate of remaining annual cash flows will be revised either upward to $2.2 million or downward to $285,000. Each revision has an equal probability of occurring. At that time, the video game project can be sold for $2.6 million. What is the revised NPV given that the firm can abandon the project after one year? (1 point)
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