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Scorecard Corp. is considering a three-year project that will require an initial investment of $30,000. It has estimated that the annual cash flows for the
Scorecard Corp. is considering a three-year project that will require an initial investment of $30,000. It has estimated that the annual cash flows for the project under good conditions will be $60,000 and $11,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is . Dot not round intermediate calculations and round your answer to the nearest dollar.) Scorecard Corp. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are good, the firm will be able to invest $6,000 in year 2 to generate an additional cash flow of $21,000 in year 3 . If conditions are bad, the firm will not make any further investments in the project. Using the information from the preceding problem, the expected NPV of this project-when taking the growth option into account-is (Note: Do not round intermediate calculations and round your answer to the nearest dollar.) Scorecard Corp.'s growth option is worth . (Note: Do not round intermediate calculations and round your answer to the nearest dollar.)
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