We are examining a new project. We expect to sell 6,100 units per year at $75 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $75 6,100 = $457,500. The relevant discount rate is 18 percent, and the initial investment required is $1,720,000. After the first year, the project can be dismantled and sold for $1,550,000. Suppose you think it is likely that expected sales will be revised upward to 9,100 units if the first year is a success and revised downward to 4,700 units if the first year is not a success.

a.If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering.(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV$

b.What is the value of the option to abandon?(Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Option value$