Jenny Rene, the CFO of Asor Products Inc., has just completed an evaluation of a proposed capital expenditure for equipment that would expand the firms manufacturing capacity. Using the traditional NPV methodology, she found the project unacceptable because. NPV traditional = -$1,700 < $0 Before recommending rejection of the proposed project, she has decided to assess whether real options might be embedded in the firms cash flows. Her evaluation uncovered three options: Option 1: Abandonment. The project could be abandoned at the end of three years, resulting in an addition to NPV of $1,200. Option 2: Growth. If the projected outcomes occurred, an opportunity to expand the firms product offerings further would become available at the end of four years. Exercise of this option is estimated to add $3,000 to the projects NPV. Option 3: Timing. Certain phases of the proposed project could be delayed if market and competitive conditions caused the firms forecast revenues to develop more slowly than planned. Such a delay in implementation at that point has an NPV of $10,000. Jenny estimated that there was a 25% chance that the abandonment option would need to be exercised, a 30% chance that the growth option would be exercised, and only a 10% chance that the implementation of certain phases of the project would affect timing. a. Use the information provided to calculate the strategic NPV, NPVstrategic, for Asor Products proposed equipment expenditure. b. On the basis of your findings in part a, what action should Jenny recommend to management with regard to the proposed equipment expenditure? c. In general, how does this problem demonstrate the importance of considering real options when making capital budgeting decisions