We expect to sell $200$ units per year at $$1$ free cash flow each into perpetuity $($i$.$e$.,$

we expect free cash flows of $$200$ per year in perpetuity$).$ In one year, we will

know more about the project. If it looks successful, sales projections will be

revised upward to $250$ units per year and, if the project looks like a failure, sales

projections will be revised downward to $150$ units per year. Assume that success

and failure are equally likely. The project costs $$900$ and the discount rate is $20\%.$

If we decide to abandon the project at the end of the first year, we can sell it for

$$800.$ Use the decision tree method to determine the value of the option to

abandon the project.