Downeast R&D is considering developing a medication that will cure the Common Coronavirus. The potential cash flows are shown below. There is a 40% Probability that the FDA will not approve the Medication. Find the Expected NPV if the Cost of Capital is 12.0%.

WACC: 12.00%

Year 0 1 2 3 4

CF_A -$1,200 $300 $500 $850 $1,100

CF_D -$1,200 -$300 -$300 -$300 -$300

If the FDA does not approve the medication, how valuable would the option to abandon the project in year two be? There is a 40% Probability that the FDA will not approve the Medication.

Year 0 1 2 3 4

CF_A -$1,200 $300 $500 $850 $1,100

CF_D -$1,200 -$300 -$300 0 0