ABC Industries has come up with a new motorcycle prototype and is ready to go ahead with pilot production and test marketing. The pilot production and test marketing phase will last for one year and cost $$610,000.$ Your management team believes that there is a $65\%$ chance that the test marketing will be successful and that there will be sufficient demand for the new mountain bike. If the test$-$marketing phase is successful, then ABC industries will invest $$2\mathrm{.}8$ million in year one to build a plant that will generate expected annual after tax cash flows of $$378,000$ in perpetuity beginning in year two. If the test market is not successful, ABC can still go ahead and build the new plant, but the expected annual after tax cash flows would be only $$225,000$ in perpetuity beginning in year two. ABC has the option to stop the project at any time and sell the prototype motorcycle to an overseas competitor for $$250,000.$ Kinston's cost of capital is $13\%.$

Assuming that ABC has the ability to sell the prototype in year one for $$250,000,$ the NPV of the ABC industries motorcycle project is closes to

Question $1$ options:

$90,909$

$-100,201$

$-470,619$

$128,932$