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Scenario #1: The project is profitable. Scenario #2: There is a 20% chance that the annual cash flows are much lower than currently estimated! What
Scenario \#1: The project is profitable. Scenario \#2: There is a 20% chance that the annual cash flows are much lower than currently estimated! What the company can do in this case: Original plan: Despite the lower cash flows, keep the project running for its original duration (i.e., for 4 years). OR: Revised plan: Shut down the project sooner, at the end of Year 2. Cash flows for each of the above scenarios: For all calculations in this problem: Round your answer to WHOLE dollar, and don't type the "\$" sign. If the value is negative, put the MINUS sign. (1) In the last row of the table above, calculate the Net Present Values for all scenarios. (2) The Expected Net Present Value of the project WITHOUT the possibility of shutting it down sooner if the cash flows turn out lower, equals $ (3) The Expected Net Present Value of the project WITH the possibility of shutting it down sooner if the cash flows turn out lower, equals $ In this case, the dollar value of this option to shut down sooner equals $
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