Kinston industries has come up wth a new mountain bike prototype and is teady to go ahead with plot production and test marketing. The pilot production and test marketing phase will last for one year and cost $500,000. Your management team believes that there is a 50% chance that the test marketirg wil be successful and that there wull be sufficenl demand for the new mountain bke. If the test-marketing phase is successtu, then Kinston Industries will imvest $3 milion in year one to buld a plant that wil generate expected annual after-4ax cash fows of $400,000 in perpetuty beginning in year two. If the test markofing is not successful, Kinston can still go ahead and buld the new plant, but the expected annual aftertax cash flows would be only $200,000 in perpetuly beginning in yoar twa. Konston has the option to stop the project at any time and sel the prototype mountain bike to an overseas competiloe for $300,000. Kinston's cost of capital is 10%. Q. Assuming that Kinston has the ability io sell the protolype in year one for 5300,000 , the NPV of the Kirston Industries Mountain 8 ike Project is dosest to: A. 590,000 B. 5590,000 C. $455,000 D. $45,000 QUESTION 3 Assuming that Kinston does not have the abiaty to sell the prototype in year one foe $300,000, the NPV of the Kinston industnes Mountain Bike Project is ciosest to: A. $45,000. B. $455,000 C. $590.000 D. $90.000