We are examining a new project. We expect to sell 6,500 units per year at $59 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $59 6,500 = $383,500. The relevant discount rate is 13 percent, and the initial investment required is $1,760,000. After the first year, the project can be dismantled and sold for $1,630,000. Suppose you think it is likely that expected sales will be revised upward to 9,500 units if the first year is a success and revised downward to 5,100 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 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 answer to 2 decimal places. e.g., 32.16.)

Option value

$