Hi-Tek Company is considering an investment project that generates a cash flow of $1,500,000 next year if the economy is favorable but generates only $650,000 if the economy is unfavorable. The probability of favorable economy is 60% and of unfavorable economy is 40%. The project will last only one year and be closed after that. The cost of investment is $1,200,000 and Merrimack plans to finance the project with $400,000 of equity and $800,000 of debt. Assuming the discount rates of both equity and debt are 0%. What is the expected cash flow to Merrimack s shareholders if the company invests in the project? (show work)

$0

$460,000

$535,000

$580,000

$420,000