Abandonment in the previous problem, suppose you think it is likely that expected sales will be revised

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Abandonment in the previous problem, suppose you think it is likely that expected sales will be revised upward to 9.000 units if the first year is a success and revised downward to 4.000 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.

b. What is the value of the option to abandon?

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Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th Edition

Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan

Question Posted: May 03, 2011 03:29 AM

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Abandonment in the previous problem, suppose you think it is likely that expected sales will be revised

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a If the project is a success present value of the future cash flows will be PV future CFs 659000PVI...View the full answer

Fundamentals of Corporate Finance

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