You are hired as a consultant for the following $6-$year logistics project

Initial Capital Spending $($paid at T$=0)$: an asset worth $$40$ mil

The asset will have no book value and will be completely worthless at the end of project$$s life.

Initial investment in Net Working Capital $($paid at T$=0)$: $$5$ million. No additional investment in NWC is expected during the project$$s life.

Operating Cash Flows: Consider the following two scenarios:

A$)$ If your client signs long term contracts with suppliers, customers, and employees, the Operating Cash Flows are projected to be $$1$M in year $1,$ $$1$M in year $2,$ and $$17$ million per year EVERY year $3$ through $6.$

B$)$ If your client signs only short$-$term contracts, the project costs will be substantially higher, and the annual Operating Cash Flows are estimated to be only $82\%$ of the annual values projected under Scenario A$.$ HOWEVER, the short$-$term contracts will allow your client to walk away from the project EXACTLY TWO YEARS FROM NOW. The client will give up all the future benefits of the project after year $2,$ but it will get a one$-$time payment of $$36$ million.

Your client understands that the project benefits are uncertain, and they can change in the future. In fact, the annualized volatility of changes in the present value of project benefits is $60\%$ per year.

The WACC for the project $($either of the two scenarios$)$ should be $11\%.$

USING EXCEL....

i$.$ What is the NPV of the project under Scenario A$?$ Would you accept it$?$ Why or why not?

ii$.$ What is the NPV of the project under Scenario B $($not considering the opportunity to walk away from the project$)?$ Would you accept the project under Scenario B $($without the option to walk away$)$ if Scenario A was not available to you? Why or why not?

iii. What is the dollar value of the opportunity to walk away from the project under Scenario B$?$

iv$.$ Ultimately, which scenario $$ if any $$ would you advise your client to undertake $$ Scenario A or Scenario B $($WITH the opportunity to walk away$)?$ Provide a number$-$based answer

v$.$ If the Scenario B project with the same options characteristics $($Costs$,$ PV of benefits; the opportunity to abandon it after $2$ years for $$36$ mil$)$ were to be considered by a BIOTECHNOLOGY company, then the value of the opportunity to walk away from the project would likely be higher$/$lower$/$equal to the value you computed in part $$iii$.($Pick the correct choice and explain why in one sentence$)$