Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Consider the case of Scorecard Corp.: Scorecard Corp. is considering a three-year project that will require an initial investment of $30,000. It has estimated that the annual cash flows for the project under good conditions will be $40,000 and $7,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 194, the expected net present value (NPV) of the project is your answer to the nearest whole dollar) (Note: Round Scorecard Corp. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are good, the firm will be able to invest $2,000 in year 2 to generate an additional cash flow of $15.000 in year 3. If conditions are bad, the firm will not make any further Investments in the project. Using the information from the preceding problem, the expected NPV of this project-when taking the growth otion into accounts (Note: Round your answer to the nearest whole dolar) Scorecard Corp's growth option is worth (Note: Sound your answer to the nearest whole d ar) . (Note: Round If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is your answer to the nearest whole dollar.) $31,615 Scorecard Corp. wants to take a potential growth option into account when calculating the project's expected NPV. If $28,287 pre good, the firm wil be able to invest $2,000 in year 2 to generate an additional cash flow of $15,000 in year 3. If conditions are bad, the pt make any further investments in the project. $33,279 $19,967 (Note: Round If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is your answer to the nearest whole dollar) $38,577 $36,648 Scorecard Corp. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are In will be able to invest $2,000 in year 2 to generate an additional cash flow of $15,000 in year 3. If conditions are bad, the firm will not me $46,292 her Investments in the project $48,221 Using the information from the preceding problem, the expected NPV of this project-when taking the growth option into accounts (Note: Round your answer to the nearest whole dollar) Scorecard Corp.'s growth option is worth (Note: Round your answer to the nearest whole dollar) your answer to the nearest whole dollar.) Scorecard Corp, wants to take a potential $6,093 Jotion into account when calculating the project's expected NPV. If conditions are good, the firm will be able to invest $2,000 in year 2 to gen $4,503 Additional cash flow of $15,000 in year 3. If conditions are bad, the firm will not make any further Investments in the project $5,828 Using the information from the preceding $4,768 | the expected NPV of this project-when taking the growth option into account is (Note: Round your answer to the neares llar) $5,298 Scorecard Corp.'s growth option is worth (Note: Round your answer to the nearest whole dollar)
