Intro Broadway Inc. is considering a new musical. The initial investment required is $2,030,000. Every year, the free cash flow to the firm from the project is expected to be $290,000, continuing forever. Investments with similar risk deliver a rate of return of 11%. Part 1 Attempt 2/3 for 5 pts. What is the NPV of the project? Correct Since the annual cash flows are constant and occur forever, we can use the perpetuity formula to find their present value: NPV=2,030,000+0.11290,000=606,364 Part 2 Attempt 1/3 for 5 pts. In fact, the annual cash flow of $290,000 is an expected value: there is a 50% chance that annual cash flow will be $652,500 and a 50% chance that it will be $72,500. What is the expected NPV of the project if the company cannot abandon the project? What is the true NPV of the project if the company can abandon the project after the first year? Part 4 Attempt 2/3 for 5 pts. What is the value of the option to abandon? Intro Broadway Inc. is considering a new musical. The initial investment required is $2,030,000. Every year, the free cash flow to the firm from the project is expected to be $290,000, continuing forever. Investments with similar risk deliver a rate of return of 11%. Part 1 Attempt 2/3 for 5 pts. What is the NPV of the project? Correct Since the annual cash flows are constant and occur forever, we can use the perpetuity formula to find their present value: NPV=2,030,000+0.11290,000=606,364 Part 2 Attempt 1/3 for 5 pts. In fact, the annual cash flow of $290,000 is an expected value: there is a 50% chance that annual cash flow will be $652,500 and a 50% chance that it will be $72,500. What is the expected NPV of the project if the company cannot abandon the project? What is the true NPV of the project if the company can abandon the project after the first year? Part 4 Attempt 2/3 for 5 pts. What is the value of the option to abandon