St. Margaret Beer Co. is considering a three-year project that will require an initial investment of $42,500. If market demand is strong, St. Margaret Beer Co. thinks that the project will generate cash flows of $28,500 per year. However, if market demand is weak, the company believes that the project will generate cash flows of only $1,000 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak.

If the company uses a project cost of capital of 14%, what will be the expected net present value (NPV) of this project if the company is ignoring the timing option?

-$7,017

-$9,080

-$8,255

-$7,842