A project costs $10 million today. Next year (year 1) the cash inflow will be either $10 million or $2 million with equal probability. If the year-1 cash inflow was $10 million, then the year-2 cash flow will also be $10 million. If the year-1 cash inflow was $2 million, then the year-2 cash flow will also be $2 million. If the firm can abandon the project ONLY after year 1 for a known amount of $3 million at that time, what is the abandonment value if the appropriate discount rate is 5%?

The right answer is: 521,000.

Tell me the step to get a rate. Thanks