) consider a project with the following cash flow;

Year cash flow shs '000' abandonment value shs '000'

0 (16,000)

1 7,000 ___________

2 6,000 1,100

3 4,000 9,000

4 4,000 5,000

The cost of capital is 15% and re-investment rate is 20%.

Required;

i) Determine the optimal abandonment period. (16 marks