Abandonment option: Use the same information for Question 15 and 16. 15. ABC is considering a project that has an up-front cost of $500,000. There is a 60 percent chance that the products will become the industry standard, in which case the project's expected cash flows will be $200,000 at the end of each of the next five years. There is a 40 percent chance that the products will not become the industry standard, in which case the project's expected cash flows will be $70,000 at the end of each of the next five years. Assume that the cost of capital is 12 percent. 16. Now assume that one year from now ABC will know if its products will standard. Also assume that after receiving the cash flows at t- 1, the company has the option to abadon the project. If it abandons the project it will receive an additional $300,000 at t- 1, but will no longer receive any cash flows after t- 1. Assume that the abandonment option does not affeet the cost of capital (WACC-12% . what is the estimated value of the abandonment option? 1, the company has the option to abandorn +3 221,533