Starbuck$$s new project$$s cash flows depend critically upon customer acceptance of the in home coffee maker. They will either love it$,$ or hate it$.$ Year $0$ costs remain the same, as for the original business case. The WACC remains $9\mathrm{.}1\%.$ Suppose that there is a $90\%$ probability that the product will be wildly successful and produce CFs of $$180,000$ a year for the $5$ years, and a $10\%$ chance it will produce annual CFs of $$$$25,000.$ Assume that the managers have a real option of abandoning the project after year $1$ if it is not doing well.

Assuming that the managers of Starbucks use a real option to abandon the project if it is not well received.

What is the expected NPV of the project using the probabilities provided for the two potential outcomes?

A$.$ $$3,200\mathrm{.}45$

B$.$ $$8,009\mathrm{.}58$

C$.$ $$9,222\mathrm{.}10$

D$.$ $$13,079\mathrm{.}87$

Assuming that the managers of Starbucks use a real option to abandon the project if it is not well received.

What is the NPV if the project is loved by customers?

A$.$ $$62,423\mathrm{.}89$

B$.$ $$75,324\mathrm{.}37$

C$.$ $$113,341\mathrm{.}58$

D$.$ $$197,445\mathrm{.}22$