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We are examining a new project. Suppose we think it is likely that expected sales will be either 9,500 units if the project is a

We are examining a new project. Suppose we think it is likely that expected sales will be either 9,500 units if the project is a success or revised downward to 3,000 units if the project is not a success. We expect $63 net cash flow APIECE for the next 10 years. The relevant discount rate is 14 percent, and the initial investment required is $1,600,000. At the end of the first year, the project can be dismantled and sold for $1,200,000 a.) If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering. b.) What is the value option to abandon?

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