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Shan Co . is considering a four - year project that will require an initial investment of $ 7 , 0 0 0 . The
Shan Co is considering a fouryear project that will require an initial investment of $ The basecase cash flows for this project are projected to be $ per year. The bestcase cash flows are projected to be $ per year, and the worstcase cash flows are projected to be $ per year. The company's analysts have estimated that there is a probability that the project will generate the basecase cash flows. The analysts also think that there is a probability of the project generating the bestcase cash flows and a probability of the project generating the worstcase cash flows.What would be the expected net present value NPV of this project if the project's cost of capital is $ $$$Shan now wants to take into account its ability to abandon the project at the end of year if the project ends up generating the worstcase scenario cash flows. If it decides to abandon the project at the end of year the company will receive a onetime net cash inflow of $at the end of year The $ the company receives at the end of year is the difference between the cash the company receives from selling off the project's assets and the company's $ cash outflow from operations. Additionally, if it abandons the project, the company will have no cash flows in years and of the project.
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