Assigned Problem 3 a. SI Inc. is considering investing in a new product named Z90. There is a 50% chance that the product will be a success, which then generates $110.000 cash inflow each year for the next 5 years. There is a 50% chance that the product will fail, which then generates $25,000 cash inflow each year for the next 5 years. The project requires an initial investment of $250,000. Based on the above information, what is the expected net present value of this Z90 project if the cost of capital is 12%? b. Now, assume that one year from now, SI Inc. will know whether the 290 has become the industry standard. Assume also that after receiving the cash flow at t= 1, SI Inc. has the option to abandon the 290 project, in which case it will receive an additional $100,000 at t= 1 but no cash flows after t= 1. Assuming that the cost of capital remains at 12%, what is the estimated value of the abandonment option? Assigned Problem 3 a. SI Inc. is considering investing in a new product named Z90. There is a 50% chance that the product will be a success, which then generates $110.000 cash inflow each year for the next 5 years. There is a 50% chance that the product will fail, which then generates $25,000 cash inflow each year for the next 5 years. The project requires an initial investment of $250,000. Based on the above information, what is the expected net present value of this Z90 project if the cost of capital is 12%? b. Now, assume that one year from now, SI Inc. will know whether the 290 has become the industry standard. Assume also that after receiving the cash flow at t= 1, SI Inc. has the option to abandon the 290 project, in which case it will receive an additional $100,000 at t= 1 but no cash flows after t= 1. Assuming that the cost of capital remains at 12%, what is the estimated value of the abandonment option