Expected demand implies that the risk-neutral value of the unrestricted contribution cash flowing Year t is €1.4 million. There is a 0.40 probability of more demand in the following period and a 0.60 probability that it will be less. If demand increases, the PV in Year t+ 1 of contributions and options is €5 million. If the demand falls instead, the PV of the contributions and options is only €2.5 million. A non-competitor might buy the project in Year t for an expected €4 million. The project’s capacity limits contributions to a maximum of €1 million per year. The cash flow data and capacity limit are risk-neutral values. Use the Option Exercise Formula to determine the PV of the project in Year t.

Would selling the project be worth considering at that time?