Ch 12: Assignment - Cash Flow Estimation and Risk Analysis 8. Abandonment options Galbraith Co. is considering a four-year project that will require an initial Investment of $15,000. The base-case cash flows for this project are projected to be $14,000 per year. The best-case cash flows are projected to be $26,000 per year, and the worst-case cash flows are projected to be $4,500 per year. The company's analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability of the project generating the best-case cash flows and a 25% probability of the project generating the worst-case cash flows. What would be the expected net present value (NPV) of this project if the project's cost of capital is 11%? O $18,714 O $28,072 O $26,902 O $23,393 Galbraith now wants to take into account its ability to abandon the project at the end of year 2 if the project ends up generating the worst case scenario cash flows. If it decides to abandon the project at the end of year 2, the company will receive a one-time net cash inflow of $4,750 (at the end of year 2). The $4,750 the company receives at the end of year 2 is the difference between the cash the company receives from selling off the project's assets and the company's -54,500 cash outflow from operations. Additionally, If it abandons the project, the company will have no cash flows in years 3 and 4 of the project. Using the information in the preceding problem, find the expected NPV of this project when taking the abandonment option into account. O $33,541 $3,612 O $24,150 $2,408 $3,784 $26,833 $3,096 O $34,883 $3,440