. A project costs $137 thousand to begin today. Next year it will cost $2.75 million to build a plant and will generate $350,000 per year forever starting in year 2. WACC for the company is 12%. . . Now suppose that there is an option to abandon the project after 1 year! So the project costs $137,000 to begin today. This begins phase 1 There is learning involved in the first year. Proceed to phase 2 only if phase 1 is promising. The is a 10% chance that phase 1 will be promising. If phase 1 is promising invest $2.75 million next year and build the plant. It will generate $350,000 per year forever (starting the year after) and is almost risk free. If phase 1 is not promising abandon the project.. What is the NPV of the project? Company WACC = 12% Company cost of debt = 7% . $0 -$122.119 thousand $63.89 thousand $73.28 thousand