$55$ points

We are examining a new project. We expect to sell $6,300$ units per year at $$57$ net cash flow apiece for the next $10$ years. In other words, the annul operating cash flow is projected to be $$576,300=$$$359,100.$ The relevant discount rate is $12$ percent, and the initial investment required is $$1,740,000.$ After the firstyear the project can be dismantled and sold for $$1,610,000.$ Suppose you think it is likely that expected sales will be revised upward to $9,300$ units if the first year is a success and revised downiward to $4,900$ units if the first year is not a success. What is the value of the option to abandon?

$$54,383\mathrm{.}85$

$$560,314\mathrm{.}83$

$$1,610,000\mathrm{.}00$

$$121,819\mathrm{.}83$