ACF Manufacturing is considering a $12-$year opportunity to invest in a new

production facility. The company has estimated that the project will require an

initial investment of $$70$ million and will generate after$-$tax free cash flows of

$$11\mathrm{.}75$ million per year over the twelve$-$year life of the project. You further

estimate that if things go badly in the first two years of the project, you will be

able to abandon the project and salvage the equipment and facilities for $$52$

million $($net of taxes$).$ The decision to abandon must be made at time $2$ or not at

all. If the volatility of returns from the project is $25\%,$ the risk$-$free interest rate is

$3\mathrm{.}5\%,$ and the project required return is $14\%,$ what is the value of the project

including the option to abandon? Use the Black$-$Scholes calculator to solve this

problem.