Question: In the previous problem, suppose you think it is likely that expected sales will be revised upward to 9,500 units if the first year is

In the previous problem, 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 3,800 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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