(The following information relates to Questions 27 and 28) You own a small manufacturing plant that currently generates revenues of $2 million per year. Next year, based upon a decision on a long-term government contract, your revenues will either increase by 25% or decrease by 10%, with equal probability, and stay at that level as long as you operate the plant. Other costs run $1.6 million per year. You can sell the plant at any time to a large conglomerate for $5 million. Your cost of capital is 10% 27. Given the embedded option to sell the plant, how much will the value of your plant be? A) B) C) D) $9.0 million $7.0 million S6.5 million S5.5 million 28. Assume that you cannot sell the plant, but you are able to shut down the plant at no cost at any time. Given the embedded option to abandon production, what will be the value of your plant? $9.0 million S7.0 million S5.5 million $4.5 million C) 5