Alset Inc. is considering manufacturing and selling high$-$end electric automobiles for the

next five years. It hired two research and development teams.

Team #$1$:

This team believes that it would be realistic to sell $14$ cars for $$309,000$ after$-$tax profit

per car $($i$.$e$.,$ operating cash flow per car$).$ The R&D team also estimates $$15\mathrm{.}3$ million in

required initial investment. A $13$ percent annual rate of return would be appropriate for

discounting all future cash flows.

a$.$ Calculate the Net Present Value of this project according to Team #$1.($Let$\text{'}$s call it the

"base$-$case Net Present Value".$)($A negative answer should be indicated by a minus

sign. Do not round intermediate calculations and enter your answer in dollars, not

millions of dollars, rounded to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89.)$

b$.$ Team #$2$:

This team has done a more sophisticated analysis, which may potentially greatly affect

the project's revised Net Present Value!

The project goes as planned for five years but the following happens. After the

first year $($i$.$e$.,$ starting Year $2),$ the sales volume will be either $19$ cars annually

or $0$ cars annually. $(0$ cars per year basically means total loss of revenue and

therefore a total failure!$)$ These two possible "paths" that the project may take

starting Year $2$ can happen with equal probability.

What the $2$nd team also noted is that it may be reasonable to shut this

project down sooner than originally planned. This would make perfect sense to

do in case of expected future loss of revenue $($i$.$e$.,$ zero revenue$).$ In such

case, the project will end at the end of the first year, and all production

equipment $($that will still have a lot of remaining value!$)$ would get sold and

generate $$11\mathrm{.}4$ million in after$-$tax salvage value.

What is Team #$2\text{'}$s revised Net Present Value? In other words, what is Team #$2\text{'}$s

calculation of the project's expected Net Present Value with the embedded option of

shutting everything down at the end of Year $1$ as explained above? $($Do not round

your intermediate calculations. Enter your final answer in dollars, not millions of

dollars, and round to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89.)$

a$.$ Base$-$case NPV

b$.$ Revised NPV