Options to Abandon and Expand After careful economic analysis, GDL has concluded that if it opens the new stores in Nevada, there is a 65% chance that store sales will be 35,000 cases per store per year (success), and a 35% chance that store sales will be only 15,000 cases per store per year (failure). If the project is a success, GDL will immediately open an additional 3 stores in Reno at a cost of $100,000, and expects sales to also be 35,000 cases per store per year at the Reno stores. If the project is a failure, GDL will sell the stores to the casino operator for $625,000. Q: Find the NPV of the project under these conditions. Prediction: Outcome Success Failure Probability 65.00% 35.00% Cases/year per store 35,000 15,000 Option to expand in 1 year: Additional stores in Reno Investment required 3 $100,000 PV of future CFs today NPV of each option NPV of the project Success Fail