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b . Now suppose the BSI can abandon the project at the end of the first year by selling it for $6 million . BSI will still receive the Year I cash flows , but will receive no cash flows in subsequent years . Assume the salvage value is risky and should be discounted at the WALL. WACC - 12%/ Salvage Value - Risk - free rate - 6% Decision Tree Analysis Cost Future Cash Flows NPY' this Probability* Probability 1 E Scenario * NPY 30%/ - $10 40%/} 30%/0 Expected NPY' of Future CH'S - When abandonment is factored in , the very large negative NPY' under bad conditions is reduced , and the expected N PY' becomes positive . Note that even though the NPY' of medium is still negative , it is higher than it would be if the project was abandoned at year I if conditions are medium